Photo AI
Raising revenue from taxation and reducing tax evasion are important aims of government - Leaving Cert Economics - Question 6 - 2019
Question 6
Raising revenue from taxation and reducing tax evasion are important aims of government. (a) (i) Explain the term underlined above and state one example of tax evas... show full transcript
Worked Solution & Example Answer:Raising revenue from taxation and reducing tax evasion are important aims of government - Leaving Cert Economics - Question 6 - 2019
Step 1
Explain the term underlined above and state one example of tax evasion.
Answer
Tax evasion refers to the illegal act of not paying taxes that are owed to the government by deliberately misrepresenting income, expenses, or other financial information. An example of tax evasion is a person who fails to report income earned from freelance work or underreports their earnings to minimize tax liability.
Step 2
State and explain two economic reasons why taxation is essential for an economy.
Answer
-
Provides Revenue for Government Activities: Taxation is essential for raising funds needed to provide public services such as healthcare, education, and infrastructure. This revenue allows the government to operate effectively and provide essential services for citizens.
-
Redistribution of Wealth: Through taxation, the government can redistribute wealth to reduce inequalities in society. This can be done through social welfare programs and public services that benefit lower-income individuals, helping to promote economic stability and social justice.
Step 3
Step 4
Is VAT an example of a direct tax or an indirect tax? Explain your answer.
Answer
VAT is classified as an indirect tax because it is not directly levied on income or wealth. Instead, it is included in the price of goods and services, making it the responsibility of the seller to collect and remit to the government.
Step 5
Outline two possible economic effects on the Irish economy of this increase in the rate of VAT for the hospitality sector.
Answer
-
Higher Prices for Consumers: The increase in VAT may lead to higher prices for goods and services in the hospitality sector, which could deter consumer spending and reduce demand for tourism services.
-
Impact on Employment: As businesses may experience a decrease in demand due to higher prices, this could lead to a reduction in jobs within the hospitality sector, as employers may need to cut costs in response to declining customer numbers.
Step 6
Outline one economic argument in favour of any two of the following government measures announced in Budget 2019.
Answer
-
Increase in Social Welfare Payments of €5 per week: This measure can improve the standard of living for low-income households, providing them with more disposable income to spend on essential goods and services, thereby stimulating the economy.
-
Introduction of 2 extra weeks paid parental leave to every parent of a child under one year of age: This policy can support family well-being and encourage higher birth rates, contributing to a stable future labor force and economic resilience.
Step 7
Outline one economic argument against any two of the following government measures announced in Budget 2019.
Answer
-
Increase in Social Welfare Payments of €5 per week: This could lead to increased government expenditure and borrowing, which may create long-term financial burdens and economic instability if not properly managed.
-
Increase of 50c in the price of a packet of 20 cigarettes: This could lead to a decrease in consumer spending, pushing smokers towards illicit markets or smuggling, thereby undermining intended revenue gains from the tax.