Income from taxes is essential for paying for important social services such as hospitals and schools. Without taxes such services would not be free and may not be provided at all.
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Ethical effects Taxes are often used by governments to discourage undesirable behaviour. For example, high taxes on cigarettes are designed to discourage smoking and taxes on plastic bags are designed to discourage litter and encourage more environmentally sustainable uses of shopping bags. A low rate of motor tax on smaller, more fuel effi cient cars is designed to encourage people to buy more environmentally sustainable cars.
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Legal effects It is illegal to evade paying taxes due. The Revenue Commissioners is the State body responsible for collecting taxes and has been given many legal powers to track down and prosecute tax evaders. If taxes are set very high, however, it can encourage tax evasion.
Did you know? The black market refers to illegally buying and selling goods and services without paying the taxes due, such as VAT, income tax or corporation tax.
Examples could include: • A plumber who fi xes a tap, but does not charge VAT or pay income tax. • A builder who pays the staff cash and does not deduct any income taxes or PRSI.
• A hairdresser who alters fi nancial records to avoid paying VAT.
Two important things to know: • The black market is illegal. People caught evading tax can be fi ned and sent to prison.
• The black market is unethical (not morally correct) as it means there is less money available to fund public services, such as hospitals and schools. It also means that honest tax payers end up paying for public services while dishonest people operating on the black market do not pay their fair share.
