The Purpose of Taxation

The Purpose of Taxation

Taxation: The process by which the government collects money from citizens and businesses to pay for public services.

Revenues: The state body responsible for the assessment and collection of all taxes and duties is the republic of Ireland.

PRINCIPLES OF A FAIR TAX SYSTEM

Equality: Amount of tax a person has to pay should be related to their ability to pay.

Certainty: Amount of tax a person must pay should be clear and predictable.

Economy: Cost of collecting a tax should be less than the amount that will be collected.

Convenience: should be easy for each person to pay their taxes when they fall due. Eg: VAT is easy to pay as the tax is included in the price.

Tax should not act as a disincentive: This means that if taxes are too high, people may decide that its not worthwhile working as revenue may take most of their income.

The government uses tax to redistribute income: A fair tax system should be used to collect money form those who earn higher incomes in order to look after those in our society who need help, eg, to provide unemployment benefit to those who don't have a job.

THE PURPOSE OF TAXATION

Financial > Social > Legal > Ethical

Financial Reasons

• Financing the work of the government: Education, health, social, welfare, policing.
• Meeting economic objectives.
• Assisting enterprise: Encourage and help entrepreneurs. LEO's provide grants.
• Servicing the national debt.

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Geography

The Purpose of Taxation

The Purpose of Taxation

Social reasons:

• Redistributing wealth and income for common goods: A major function of taxation is to transfer money from those on high incomes to those on lower and zero incomes.
• Meeting Social Objectives: Discourage people, excise duty on tobacco and alcohol, sugar tax → reduce obesity.

Legal Reasons: Fulfilling a legal requirement: Payments of taxes is compulsory severe penalties to those who don't pay their taxes.

Ethical Reasons: Fairness: Tax must be fair and apply to everyone, depending on their ability to pay.