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In Budget 2014 The Minister for Finance decided to retain the reduced 9% VAT rate in the tourism sector and to remove the €3 Airport travel tax - Leaving Cert Economics - Question 4 - 2014
Question 4
In Budget 2014 The Minister for Finance decided to retain the reduced 9% VAT rate in the tourism sector and to remove the €3 Airport travel tax. (i) Explain the ter... show full transcript
Worked Solution & Example Answer:In Budget 2014 The Minister for Finance decided to retain the reduced 9% VAT rate in the tourism sector and to remove the €3 Airport travel tax - Leaving Cert Economics - Question 4 - 2014
Step 1
Step 2
Are the taxes underlined above direct taxes or indirect taxes? Explain your answers.
Answer
Both the VAT and the Airport Travel Tax are classified as indirect taxes. Indirect taxes are not directly levied on income or properties but are included in the price of goods and services or services utilized. Consumers pay these taxes indirectly through their purchases.
Step 3
Discuss two possible economic reasons why the Minister for Finance decided on the above measures.
Answer
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Encourage Tourism: By retaining the reduced VAT rate, the government aims to stimulate tourism, making Ireland a more attractive destination. This could increase visitor numbers, leading to higher spending in the economy.
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Revenue Generation: Removing the Airport Travel Tax could increase passenger traffic, leading to higher overall tax revenues from other indirect taxes such as VAT on services utilized in airports.
Step 4
Step 5
Outline two economic effects which austerity measures may have on Irish citizens.
Answer
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Increased Unemployment: Austerity measures can lead to job losses in the public sector, increasing unemployment rates and reducing overall income in households.
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Reduced Public Services: With cuts in government spending, essential services such as healthcare and education may suffer, adversely affecting those who depend on these services.
Step 6
Outline one economic argument in favour of and one economic argument against A reduction in Jobseekers Allowance.
Answer
In favour: Decreased expenditure; reducing government spending can help manage budget deficits. Against: Inequitable; those unable to find work might struggle, creating deeper economic hardship for vulnerable populations.
Step 7
Outline one economic argument in favour of and one economic argument against Increase in rate of Deposit Interest Retention Tax (DIRT) from 33% to 41%.
Answer
In favour: Increased revenue; this will raise more funds for the government to utilize for public services. Against: Disincentivizes saving; higher taxes on savings may lead individuals to save less, adversely affecting personal financial planning.
Step 8
Outline one economic argument in favour of and one economic argument against Increase in excise duty on tobacco.
Answer
In favour: Health benefits; increasing excise duty can reduce tobacco consumption, leading to better public health outcomes. Against: Inflation; the increase in prices of tobacco products may push consumers to seek cheaper alternatives, impacting the economy negatively.