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Raising revenue from taxation and reducing tax evasion are important aims of government - Leaving Cert Economics - Question 6 - 2019
Question 6
Raising revenue from taxation and reducing tax evasion are important aims of government. (a) (i) Explain the term underlined above and state one example of tax evas... show full transcript
Worked Solution & Example Answer:Raising revenue from taxation and reducing tax evasion are important aims of government - Leaving Cert Economics - Question 6 - 2019
Step 1
Explain the term tax evasion and provide an example.
Answer
Tax evasion refers to the illegal act of not paying taxes owed, often by underreporting income or inflating deductions. For example, a teacher who offers private tutoring without declaring this income to the tax authorities is committing tax evasion.
Step 2
State and explain two economic reasons why taxation is essential for an economy.
Answer
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Provides Revenue for Government Operations: Taxation is crucial as it funds essential public services such as defense, healthcare, and education, which are necessary for the functioning of society.
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Redistributes Wealth: By collecting taxes and providing social welfare programs, the government can help reduce income inequality, ensuring that essential services are accessible to all citizens, thereby promoting social stability.
Step 3
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Step 5
Outline two possible economic effects on the Irish economy of this increase in the rate of VAT for the hospitality sector.
Answer
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Higher Prices for Consumers: As businesses pass on the increased VAT to consumers, we may see higher prices in the hospitality sector, potentially decreasing demand.
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Impact on Employment: Increased prices may lead to a decrease in tourism, which could result in job losses in the hospitality sector as businesses may need to reduce staff due to lower customer numbers.
Step 6
Outline one economic argument in favour of and one economic argument against an increase in social welfare payments of €5 per week.
Answer
In favour: Improved Standard of Living - Increasing social welfare payments can help reduce poverty and enhance the standard of living for low-income households.
Against: Increased Government Expenditure - This could lead to higher government borrowing as funds for increased payments might not be readily available, straining public finances.
Step 7
Outline one economic argument in favour of and one economic argument against an increase of 50c in the price of a packet of 20 cigarettes.
Answer
In favour: Government Revenue - The increase in cigarette prices can generate additional tax revenue for the government, which can be used for public health initiatives.
Against: Opportunity Cost - Higher prices may lead to increased smuggling as consumers seek cheaper alternatives, which could undermine legal sales and tax revenues.
Step 8
Outline one economic argument in favour of and one economic argument against the introduction of 2 extra weeks paid parental leave to every parent of a child under one year of age.
Answer
In favour: Support for Families - Providing additional paid leave promotes family wellbeing, allowing parents to care for their newborns without financial pressure.
Against: Increased Burden on Employers - This may lead to increased costs for businesses, potentially reducing their capacity to hire more staff or invest in growth.