Illustrate your understanding of the term "Taxation Credit". - Leaving Cert Business - Question 3 - 2004

Tax credits are financial benefits granted to taxpayers, replacing the previous system of Tax Free Allowances introduced in 2001. They are designed to reduce the amount of income tax an individual owes based on various personal circumstances.

Key Features of Taxation Credits

1. Eligibility: Taxpayers may qualify for various tax credits depending on their specific situations. Common examples include credits for married persons and employees under the PAYE (Pay As You Earn) tax system.

2. Non-refundable: Unlike some other forms of government assistance, tax credits do not produce a refund if they exceed the tax liability. They simply reduce the total tax owed.

3. Calculation: The amount of tax owed can be calculated using the formula:

   $\text{Gross Tax} - \text{Tax Credits} = \text{Tax Payable}$

This formula illustrates how tax credits directly impact the final amount of income tax a taxpayer must pay.