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Why taxes? To redistribution of wealth To run the country / government To build and upkeep infrastructure To reduce imports To service the government’s debt To stop undesirable habits To control dogs and guns Previous Slide Next Slide
Taxes must be equal This means that people in the same circumstances must pay the same amount. We both earn €500 per week. However her circumstances are different, she has had a lot of medical expenses, has a mortgage, has a handicapped child. Previous Slide Next Slide
Taxes must be Certain Taxes must be Certain This means people know in advance what they will have to pay. Your tax bill does not depend on the government's spending habits for the year. So you do not get a surprise at the end of the year. Previous Slide Next Slide No Surprises!!
Taxes must be economical to collect This means it cannot cost more to collect than it brings in. Previous Slide Next Slide Too many of us is a bad thing!!! The exception to this is dog and gun licences, as they are for the benefit of society rather than to bring in money. Money got in from the tax Cost of collecting the tax I must be greater!!!
Taxes must be convenient to collect Neither the tax office or the tax payer wants hassle collecting the tax. For example the tax workers pay called Pay As You Earn (PAYE) is collected by your employer. Previous Slide Next Slide
Canons of taxation Taxes must follow the principles of: Equity Certainty Convenience Economical to collect Previous Slide Next Slide
Direct or Indirect Tax PAYE direct tax VAT Indirect tax What is the difference? Previous Slide Next Slide Direct Tax, with this type of tax you have no choice, but to pay. For example PAYE. Indirect tax, you only pay this type of tax, if you take a certain action. For example you buy goods so you pay VAT.
A Progressive Tax A Progressive Tax This type of tax is devised to collect tax according to ones wealth. €200 is a lot of money to some people but not FOR others. So a Progressive Tax is based on ones ability to pay. Previous Slide Next Slide
Pay as You Earn (PAYE) Pay as You Earn (PAYE) This is the tax that employees pay, based on the amount of their salary. In Ireland employers have to collect this tax, from their employees pay packet. Note students are sometimes entitle to get the tax they paid on their summer job back, provided they are not working for the rest of the year. Previous Slide Next Slide
How does the Irish government aim to make the PAYE system a progressive tax? You have to earn a certain amount before you enter the tax net. One pays reduced tax if you have for example medical expenses, are paying a mortgage or have a handicapped child etc. Previous Slide Next Slide
Corporation Tax Corporation Tax This is the tax paid by companies. Ireland has low corporation tax for certain categories of firms, to encourage them to set up here. What happens, if this increases a lot? Previous Slide Next Slide India here we come!!
Capital Gains tax Capital Gains tax This is tax paid on the increase in wealth gained from the sale of shares or property. The longer you have had the shares or property the less you will pay. At the moment, money gained from the sale of your private residence is exempt and the first €1270 made in any tax year is exempt. Previous Slide Next Slide
CAPITAL ACQUISITIONS TAX This is the tax one pays on inheritance or gifts. The closer the family relationship between the donor and the receiver the less the tax. This is an accumulated tax, in that what you receive from another person is taken into account, when the tax is being calculated on an inheritance or gift from a consecutive people. Previous Slide Next Slide
Exceptions to Capital Acquisitions Tax There are a number of items that are not assessable for capital acquisitions tax. The most important are: The first 3,000 euro of gifts from one donor (this does not apply to inheritances). Superannuation benefits Lottery winnings (this means you do not pay tax when you receive the money; if you then make a gift of some of the money to another person, the gift may be taxable as may the money when passed on inheritance.). Payments made during the donor's life to family members for normal maintenance, support or education. The proceeds of certain insurance policies that are designed to produce the money to pay capital acquisitions tax. A gift or inheritance that is taken exclusively for the purpose of paying the medical expenses (including the associated cost of maintenance) of a permanently disabled person. Previous Slide Next Slide
Family Home Under certain circumstances, there is no Capital Acquisitions Tax on a gift or inheritance of a family home. This is the case if: the recipient lived in the house for the three years prior to the transfer and the recipient does not have an interest in any other residential property and the recipient owns and lives in the house for 6 years after the transfer. However, this last condition does not apply to recipients who are aged over 55. There are provisions made for those recipients who are unable to comply with this condition because of work commitments or illness. Previous Slide Next Slide
Value Added Tax (VAT) Value Added Tax (VAT) This is tax one pays when they buy goods or services. The shopkeeper or service provider adds it to the cost of the goods or services. This is a known as a consumer tax in some countries. In some countries, goods are priced in the shop minus this type of tax, but when the customer comes to the checkout they will be asked for the cost price plus the consumer tax. Previous Slide Next Slide
How does a shop calculate the amount of VAT it pays? The shop collects this tax on behalf of the government. The difference between the amount of VAT the producer, wholesaler or retailer charged the shopkeeper and the amount the shopkeeper charged the customer must be paid to the government. If the amount of VAT paid by the business exceeds the VAT charged by business, the government will repay the excess. This ensures that VAT is paid by the ultimate customer, not by the business. Previous Slide Next Slide
Motor Tax Motor Tax This tax has to be paid on all vehicles before they can be driven on a public road. The rate of tax, will depend on the engine strength of the vehicle. Previous Slide Next Slide
Vehicle Registration Tax (VRT) Every new car in Ireland is liable for Vehicle Registration Tax, which is payable when the car is first registered. You are then given a unique number for the vehicle. This number has to be displayed on the back and front number plates of the vehicle. You can register the car and pay the VRT at your local Vehicle Registration Office (VRO). The Vehicle Registration Office will calculate the VRT for you. In the case of cars and small vans, the amount of VRT payable is based on a percentage of the recommended retail price. Disabled drivers may be exempt. Previous Slide Next Slide
Excise Duty Excise Duty This is the tax paid on cigarettes, tobacco, alcohol and fuel. Previous Slide Next Slide
Stamp Duty This is the tax payable, when property changes ownership. Previous Slide Next Slide
Environmental Taxes Environmental Taxes This is a type of tax levied to encourage consumers to be environmental friendly. Sometimes known as Green Taxes. An example of this type of tax is the plastic bag levy. Based on the polluter pays principle. Thus acting as a deterrent for those that would potentially damage the environment. Also raises money to help pay for the damage caused by the polluter. Governments have to be careful with these types of taxes, as over taxation can lead to tax evasion. For example dumping rubbish rather than pay domestic refuse tax. These taxes can also effect the poor in society more harshly. For example the plastic bag tax is the same for the rich, as the poor. Previous Slide Next Slide
Dangers of an increase in Taxation Disincentive effect, choose leisure rather than overtime. Companies can move elsewhere. Decrease the spending power and hence reduce jobs. Rich might live out of the country for a at least half of the year. Prevent savings for house, emergencies etc. Previous Slide Next Slide
Difference in tax avoidance and tax evasion Previous Slide Next Slide Tax avoidance is where the taxpayer uses a legitimate loophole the tax system to avoid paying tax. Like buying an apartment to rent in an area, where the government has given tax concessions to encourage redevelopment. Tax evasion is where a taxpayer does not pay the tax, they are due to pay. Evasion is a crime, avoidance is not.