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Irish citizens contribute both direct taxes and indirect taxes to the government - Leaving Cert Economics - Question 5 - 2016
Question 5
Irish citizens contribute both direct taxes and indirect taxes to the government. (i) Explain each of the underlined terms and state one example of each. (ii) Outl... show full transcript
Worked Solution & Example Answer:Irish citizens contribute both direct taxes and indirect taxes to the government - Leaving Cert Economics - Question 5 - 2016
Step 1
Explain each of the underlined terms and state one example of each.
Answer
Direct taxes are taxes imposed directly on individuals' income or wealth. An example of a direct tax is Income Tax, which is paid directly from earnings. Indirect taxes, on the other hand, are taxes imposed on goods and services, typically collected by an intermediary. An example of an indirect tax is Value Added Tax (VAT), which is added to the price of goods and services at the point of sale.
Step 2
Outline two uses of taxation revenue by the government.
Answer
- To provide revenue for the government: Taxation revenue funds essential public services, such as education, healthcare, and infrastructure development, ensuring that society can function effectively.
- To help redistribute income: Taxation can be structured to reduce income inequality by taxing higher incomes at higher rates and using the revenue to fund social programs that benefit lower-income individuals and families.
Step 3
Discuss two arguments for or against the introduction of a sugar tax.
Answer
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Argument in Favor: Revenue Generation: Introducing a sugar tax could generate significant revenue for the government, which can be used to fund health initiatives aimed at reducing obesity and related health issues.
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Argument Against: Higher Prices for Consumers: A sugar tax may lead to increased prices for sugary foods, disproportionately affecting lower-income households who may be more sensitive to price increases, potentially making it a regressive tax.
Step 5
Explain one possible economic effect which reductions in the USC rates may have on each of the following: employees.
Answer
For employees, a reduction in USC rates may result in higher disposable income. This means that employees will have more money available after taxes, which can increase consumer spending and boost overall economic activity.
Step 6
Explain one possible economic effect which reductions in the USC rates may have on each of the following: imports into Ireland.
Answer
Reductions in USC rates may increase imports into Ireland as higher disposable income for consumers can lead to increased spending on foreign goods and services. As people feel financially more secure, they may choose to purchase more imported items.
Step 7
Explain one possible economic effect which reductions in the USC rates may have on each of the following: level of employment in Ireland.
Answer
The reductions in USC rates may positively impact the level of employment in Ireland. As disposable incomes rise, consumer spending can increase, leading businesses to hire more employees to meet the heightened demand for goods and services, thus potentially lowering unemployment levels.
Step 8
Step 9
State and explain two possible economic advantages for Ireland of this fall in unemployment.
Answer
- Increase in standard of living/reduced poverty: As unemployment falls, more individuals and families will have reliable incomes, leading to an improvement in their quality of life and a reduction in poverty levels.
- Increase in government tax revenues: A decline in unemployment means more people are working and earning wages, which enhances government tax revenues from income tax and other contributions, providing the government with more resources to invest in public services.
Step 10
Suggest one measure the Irish government could take to reduce youth unemployment.
Answer
The Irish government could introduce subsidized work placements/internships. By partnering with businesses to provide financial incentives for hiring young people, this measure would encourage companies to create job opportunities specifically targeted at reducing youth unemployment.