© annie patton taxes next slide. © annie patton aim of the lesson this lesson outlines the purpose...

© Annie Patton© Annie Patton

TaxesTaxes

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Aim of the LessonAim of the Lesson

This lesson outlines the purpose of This lesson outlines the purpose of taxation, the main types of taxes that are taxation, the main types of taxes that are levied in Ireland at the moment and the levied in Ireland at the moment and the circumstances that these taxes are circumstances that these taxes are collected. collected.

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Why taxes?Why taxes?

To redistribution of wealthTo redistribution of wealth To run the country / governmentTo run the country / government To build and upkeep infrastructureTo build and upkeep infrastructure To reduce importsTo reduce imports To service the government’s debtTo service the government’s debt To stop undesirable habitsTo stop undesirable habits To control dogs and gunsTo control dogs and guns



Taxes must be equalTaxes must be equal

This means that people in the same This means that people in the same circumstances must pay the same amount.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.



Taxes must be CertainTaxes must be Certain

This means people know in advance what This means people know in advance what they will have to pay.they will have to pay.

Your tax bill does not depend on the Your tax bill does not depend on the government's spending habits for the year. government's spending habits for the year. So you do not get a surprise at the end of So you do not get a surprise at the end of the year.the year.


No Surprises!!


Taxes must be economical to collectTaxes must be economical to collect

This means it cannot cost more to collect than it brings This means it cannot cost more to collect than it brings in.in.


Too many of us is a bad thing!!!

The exception to this is dog and gun licences, as they are for The exception to this is dog and gun licences, as they are for the benefit of society rather than to bring in money.the benefit of society rather than to bring in money.

Money got in from the tax

Cost of collecting the taxI must be greater!!!


Taxes must be convenient to collectTaxes must be convenient to collect

Neither the tax office or the tax payer Neither the tax office or the tax payer wants hassle collecting the tax.wants hassle collecting the tax.

For example the tax workers pay called For example the tax workers pay called Pay As You Earn (PAYE) is collected by Pay As You Earn (PAYE) is collected by your employer.your employer.



Canons of taxationCanons of taxation

Taxes must follow the principles of:Taxes must follow the principles of: EquityEquity CertaintyCertainty ConvenienceConvenience Economical to collectEconomical to collect



Direct or Indirect TaxDirect or Indirect Tax

PAYE direct taxPAYE direct tax VAT Indirect taxVAT Indirect tax

What is the difference?What is the difference?


• 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 TaxA Progressive Tax

This type of tax is devised to collect tax This type of tax is devised to collect tax according to ones wealth. according to ones wealth.

€€200 is a lot of money to some people but 200 is a lot of money to some people but not FOR others.not FOR others.

So a Progressive Tax is based on ones So a Progressive Tax is based on ones ability to pay.ability to pay.



Pay as You Earn (PAYE)Pay as You Earn (PAYE)

This is the tax that employees pay, based This is the tax that employees pay, based on the amount of their salary.on the amount of their salary.

In Ireland employers have to collect this In Ireland employers have to collect this tax, from their employees pay packet.tax, from their employees pay packet.

Note students are sometimes entitle to get Note students are sometimes entitle to get the tax they paid on their summer job the tax they paid on their summer job back, provided they are not working for the back, provided they are not working for the rest of the year. rest of the year.



How does the Irish government aim to make the How does the Irish government aim to make the PAYE system a progressive tax?PAYE system a progressive tax?

You have to earn a certain amount before You have to earn a certain amount before you enter the tax net.you enter the tax net.

One pays reduced tax if you have for One pays reduced tax if you have for example medical expenses, are paying a example medical expenses, are paying a mortgage or have a handicapped child etc.mortgage or have a handicapped child etc.



Corporation TaxCorporation Tax

This is the tax paid by companies.This is the tax paid by companies. Ireland has low corporation tax for certain Ireland has low corporation tax for certain

categories of firms, to encourage them to categories of firms, to encourage them to set up here.set up here.

What happens, if this increases a lot?What happens, if this increases a lot?


India here we come!!


DIRT DIRT Deposit Interest Retention TaxDeposit Interest Retention Tax

This is the tax one pays on the interest This is the tax one pays on the interest gained on savings.gained on savings.

Collected by banks and other financial Collected by banks and other financial institutions, before the saver gets the institutions, before the saver gets the interest.interest.

Charities are exempt from paying DIRT.Charities are exempt from paying DIRT.



Capital Gains taxCapital Gains tax

This is tax paid on the increase in wealth This is tax paid on the increase in wealth gained from the sale of shares or property.gained from the sale of shares or property.

The longer you have had the shares or The longer you have had the shares or property the less you will pay.property the less you will pay.

At the moment, money gained from the At the moment, money gained from the sale of your private residence is exempt sale of your private residence is exempt and the first €1270 made in any tax year is and the first €1270 made in any tax year is exempt.exempt.



CAPITAL ACQUISITIONS TAXCAPITAL ACQUISITIONS TAX

This is the tax one pays on inheritance or This is the tax one pays on inheritance or gifts.gifts.

The closer the family relationship between The closer the family relationship between the donor and the receiver the less the tax.the donor and the receiver the less the tax.

This is an accumulated tax, in that what This is an accumulated tax, in that what you receive from another person is taken you receive from another person is taken into account, when the tax is being into account, when the tax is being calculated on an inheritance or gift from a calculated on an inheritance or gift from a consecutive people.consecutive people.



Exceptions to Capital Acquisitions Exceptions to Capital Acquisitions TaxTax

There are a number of items that are not assessable for capital There are a number of items that are not assessable for capital acquisitions tax. The most important are:acquisitions tax. The most important are:

The first 3,000 euro of gifts from one donor (this does not apply to The first 3,000 euro of gifts from one donor (this does not apply to inheritances). inheritances).

Superannuation benefits Superannuation benefits Lottery winnings (this means you do not pay tax when you receive 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 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 person, the gift may be taxable as may the money when passed on inheritance.). inheritance.).

Payments made during the donor's life to family members for Payments made during the donor's life to family members for normal maintenance, support or education. normal maintenance, support or education.

The proceeds of certain insurance policies that are designed to The proceeds of certain insurance policies that are designed to produce the money to pay capital acquisitions tax. produce the money to pay capital acquisitions tax.

A gift or inheritance that is taken exclusively for the purpose of A gift or inheritance that is taken exclusively for the purpose of paying the medical expenses (including the associated cost of paying the medical expenses (including the associated cost of maintenance) of a permanently disabled person. maintenance) of a permanently disabled person.



Family HomeFamily Home

Under certain circumstances, there is no Capital Under certain circumstances, there is no Capital Acquisitions Tax on a gift or inheritance of a family home. Acquisitions Tax on a gift or inheritance of a family home. This is the case if:This is the case if:the recipient lived in the house for the three years prior to the recipient lived in the house for the three years prior to the transfer and the transfer and the recipient does not have an interest in any other the recipient does not have an interest in any other residential property and residential property and the recipient owns and lives in the house for 6 years after the recipient owns and lives in the house for 6 years after the transfer. However, this last condition does not apply to the transfer. However, this last condition does not apply to recipients who are aged over 55. There are provisions recipients who are aged over 55. There are provisions made for those recipients who are unable to comply with made for those recipients who are unable to comply with this condition because of work commitments or illness. this condition because of work commitments or illness.



Value Added Tax (VAT)Value Added Tax (VAT)

This is tax one pays when they buy goods or This is tax one pays when they buy goods or services.services.

The shopkeeper or service provider adds it to The shopkeeper or service provider adds it to the cost of the goods or services.the cost of the goods or services.

This is a known as a consumer tax in some This is a known as a consumer tax in some countries.countries.

In some countries, goods are priced in the shop In some countries, goods are priced in the shop minus this type of tax, but when the customer minus this type of tax, but when the customer comes to the checkout they will be asked for the comes to the checkout they will be asked for the cost price plus the consumer tax.cost price plus the consumer tax.



How does a shop calculate the amount How does a shop calculate the amount of VAT it pays?of VAT it pays?

The shop collects this tax on behalf of the The shop collects this tax on behalf of the government.government.

The difference between the amount of VAT the The difference between the amount of VAT the producer, wholesaler or retailer charged the producer, wholesaler or retailer charged the shopkeeper and the amount the shopkeeper shopkeeper and the amount the shopkeeper charged the customer must be paid to the charged the customer must be paid to the government. government.

If the amount of VAT paid by the business If the amount of VAT paid by the business exceeds the VAT charged by business, the exceeds the VAT charged by business, the government will repay the excess.government will repay the excess.

This ensures that VAT is paid by the ultimate This ensures that VAT is paid by the ultimate customer, not by the business.customer, not by the business.



Motor TaxMotor Tax

This tax has to be paid on all vehicles This tax has to be paid on all vehicles before they can be driven on a public road.before they can be driven on a public road.

The rate of tax, will depend on the engine The rate of tax, will depend on the engine strength of the vehicle.strength of the vehicle.



Vehicle Registration Tax (VRT)Vehicle Registration Tax (VRT)

Every new car in Ireland is liable for Vehicle Registration Every new car in Ireland is liable for Vehicle Registration Tax, which is payable when the car is first registered. Tax, which is payable when the car is first registered.

You are then given a unique number for the vehicle. This You are then given a unique number for the vehicle. This number has to be displayed on the back and front number has to be displayed on the back and front number plates of the vehicle.number plates of the vehicle.

You can register the car and pay the VRT at your local You can register the car and pay the VRT at your local Vehicle Registration Office (VRO). The Vehicle Vehicle Registration Office (VRO). The Vehicle Registration Office will calculate the VRT for you. In the Registration Office will calculate the VRT for you. In the case of cars and small vans, the amount of VRT payable case of cars and small vans, the amount of VRT payable is based on a percentage of the recommended retail is based on a percentage of the recommended retail price. price.

Disabled drivers may be exempt.Disabled drivers may be exempt.



Excise DutyExcise Duty

This is the tax paid on cigarettes, tobacco, This is the tax paid on cigarettes, tobacco, alcohol and fuel.alcohol and fuel.



Stamp DutyStamp Duty

This is the tax payable, when property This is the tax payable, when property changes ownership.changes ownership.



Pay Related Social Insurance (PRSI)Pay Related Social Insurance (PRSI)

Not really a tax, but a compulsory insurance Not really a tax, but a compulsory insurance payment.payment.

It is compulsory for all employers and It is compulsory for all employers and employees, except those employees on a low employees, except those employees on a low income.income.

The contributions go towards the National Social The contributions go towards the National Social Insurance Fund.Insurance Fund.

Benefits include Job Seekers Payments, Benefits include Job Seekers Payments, Maternity leave pay, Adoptive leave pay, Old Maternity leave pay, Adoptive leave pay, Old Age Contributory pension, Disability pay, Age Contributory pension, Disability pay, Widows / Widowers Contributory Pension.Widows / Widowers Contributory Pension.



Environmental TaxesEnvironmental Taxes This is a type of tax levied to encourage consumers to be This is a type of tax levied to encourage consumers to be

environmental friendly.environmental friendly. Sometimes known as Green Taxes.Sometimes known as Green Taxes. An example of this type of tax is the plastic bag levy.An example of this type of tax is the plastic bag levy. Based on the polluter pays principle. Thus acting as a Based on the polluter pays principle. Thus acting as a

deterrent for those that would potentially damage the deterrent for those that would potentially damage the environment.environment.

Also raises money to help pay for the damage caused by Also raises money to help pay for the damage caused by the polluter.the polluter.

Governments have to be careful with these types of taxes, Governments have to be careful with these types of taxes, as over taxation can lead to tax evasion. For example as over taxation can lead to tax evasion. For example dumping rubbish rather than pay domestic refuse tax.dumping rubbish rather than pay domestic refuse tax.

These taxes can also effect the poor in society more These taxes can also effect the poor in society more harshly. For example the plastic bag tax is the same for the harshly. For example the plastic bag tax is the same for the rich, as the poor.rich, as the poor.



Dangers of an increase in TaxationDangers of an increase in Taxation

Disincentive effect, choose leisure rather Disincentive effect, choose leisure rather than overtime.than overtime.

Companies can move elsewhere.Companies can move elsewhere. Decrease the spending power and hence Decrease the spending power and hence

reduce jobs.reduce jobs. Rich might live out of the country for a at Rich might live out of the country for a at

least half of the year.least half of the year. Prevent savings for house, emergencies Prevent savings for house, emergencies

etc.etc.Previous Slide Next Slide


Difference in tax avoidance and tax Difference in tax avoidance and tax evasionevasion


Tax avoidance is where the taxpayer uses a Tax avoidance is where the taxpayer uses a legitimate loophole the tax system to avoid legitimate loophole the tax system to avoid paying tax. Like buying an apartment to rent in paying tax. Like buying an apartment to rent in an area, where the government has given tax an area, where the government has given tax concessions to encourage redevelopment.concessions to encourage redevelopment.

Tax evasion is where a taxpayer does not pay Tax evasion is where a taxpayer does not pay the tax, they are due to pay.the tax, they are due to pay.

Evasion is a crime, avoidance is not.Evasion is a crime, avoidance is not.


ConclusionConclusion PAYEPAYE VATVAT DIRTDIRT CGTCGT CATCAT VRTVRT Motor TaxMotor Tax Stamp dutyStamp duty Excise DutyExcise Duty Environmental (Green) TaxesEnvironmental (Green) Taxes

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