The Purpose of Taxation

yay taxes! These flashcards are only really applicable to Ireland.

Financial reason

The government spends taxpayers' money on essential services such as education. The government can encourage economic growth by decreasing VAT and income tax.

Legal reason

If you earn income over a certain amount, you are legally obliged to pay income tax. If you own a vehicle, you are legally obliged to pay motor tax. If you own a company that makes profit, you are legally obliged to pay corporation tax.

Social reason

Tax on CO2 emissions encourage people to buy environmentally friendly cars. Tax on cigarettes encourage people to stop smoking. Plastic bag levy discourages plastic bag usage.

Ethical reason

Doing the morally right thing.

Direct tax

Tax on income as it's earned. The individual/ organisation upon which the tax is levied must pay the tax and it cannot be passed on to anyone else. Eg. Income tax, Corporation tax, PRSI, USC.

Progressive tax

The more money earned, the more tax paid. Eg. Income tax, USC, PRSI, Corporation tax.

Indirect tax

Tax on income as it's spent. The tax is paid to the seller who then sends it to Revenue. The tax is paid when consumers purchase goods/services. It is added on to the cost. Eg. VAT, Excise duty, Stamp duty.

Regressive tax

Doesn't take into account the income of the consumer, everyone pays the same amount.

Gross tax

Tax before tax credits are deducted.

Tax payable

Gross tax -- tax credits. The tax you actually pay.

Gross pay

Pay before tax deductions

Net pay aka take-home pay

Wages after tax is deducted.

PPSN

Personal Public Service Number is an individual's unique number that is used in all public dealings with public service agencies eg. healthcare.

Tax credits

Legally reduces the tax you have to pay. Eg. PAYE tax credits. Always taken off of PAYE/income tax.

Tax avoidance

Reducing the tax you must pay in a legal manner, eg. claiming tax credits.

Tax evasion

It is illegal and happens when people do not declare all of their income and thus pay less tax.

Office of the Revenue Commissions

The state agency that collects taxes.

Taxation

A compulsory payment made to the government by individuals that earn income, purchase goods and services, save money and own property.