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Discuss how the Irish Government could use the tax system to create a positive climate for business in Ireland - Leaving Cert Business - Question C - 2009
Question C
Discuss how the Irish Government could use the tax system to create a positive climate for business in Ireland. Use examples to illustrate your answer.
Worked Solution & Example Answer:Discuss how the Irish Government could use the tax system to create a positive climate for business in Ireland - Leaving Cert Business - Question C - 2009
Step 1
Introduction to the Current Economic Climate
Answer
The Irish economy is currently facing a recession due to several factors including rising unemployment and the collapse of crucial sectors such as construction and banking. As a result, the government needs to adopt strategic measures to stimulate business.
Step 2
Utilizing the Tax System to Stimulate Business
Answer
The Irish Government can employ various tax strategies to foster a more supportive environment for businesses. These strategies include:
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PAYE Reductions: Reducing the PAYE rates will increase disposable income for employees, thereby stimulating demand for goods and services.
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Corporate Tax Rates: Maintaining low corporate tax rates (e.g., 12.5%) will attract foreign direct investment, making Ireland a favorable location for multinational corporations.
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Research and Development (R&D) Incentives: Offering tax credits for businesses engaged in R&D can encourage innovation and growth in various sectors.
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Stamp Duty and VAT Adjustments: Lowering VAT and stamp duty can ease the financial burden on consumers and businesses, leading to increased transactions and economic activity.
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Tax Incentive Schemes: Implementing schemes like tax holidays for new startups and sectors looking to relocate can attract new business ventures.
Step 3
Examples of Positive Impact
Answer
For example, the introduction of the R&D tax credit has incentivized tech firms to invest significantly in Ireland. Companies like Google and Facebook have benefitted from favorable corporate tax rates, enhancing job creation and contributing to local economies. Additionally, reducing VAT on essential goods could improve consumer spending, further benefiting businesses.
Step 4
Conclusion
Answer
In summary, the Irish Government holds the potential to leverage its tax system as a critical tool for economic recovery. Through strategic tax reductions and incentives, it can create a more supportive climate for business, essential for restoring confidence and driving growth in the economy.