Taxing a tax

[TheOmbudsman]

Here's a definition as provided by the ESB:

Public Service Obligation (PSO) Levy
The Public Service Obligation (PSO) levy relates to the purchase by ESB of the output of certain peat generated electricity, in the interests of security of supply, and the output of certain generating stations using renewable, sustainable or alternative forms of energy, in the interests of environmental protection, in accordance with a PSO order made by the Minister for Public Enterprise. The cost of purchase by ESB of these sources of electricity was included in electricity bills issued by the Board prior to the introduction of the PSO levy and therefore, an appropriate adjustment has been made to separately identify the PSO levy, on a basis approved by the Commission for Energy Regulation.

So it's a form of tax really, which is put to good use, hopefully.
The irritating thing about it is that the government profits from it by charging VAT on the levy. So we pay a "tax" and then then that tax is taxed.

[zakalwe]

you're absolutely correct.
there is another "tax on a tax" that has been in operation for years, namely the VRT.
Say the price of a car is Eur20,000. The VRT is approx Eur5,000. The VAT on the car is Eur25,000 * 21% which means that the consumer pays Eur32,250. Not a good price for a Eur20k car.

[SPN]

you're absolutely correct.
there is another "tax on a tax" that has been in operation for years, namely the VRT.
Say the price of a car is Eur20,000. The VRT is approx Eur5,000. The VAT on the car is Eur25,000 * 21% which means that the consumer pays Eur32,250. Not a good price for a Eur20k car.

The €30,250 VAT incl price (not €32,250!) should be compared to the €24,200 VAT incl price.

It is also worth noting that the €20K base price in Ireland is lower than the base price in the UK because the Manufacturers take a lower margin in Ireland as a result of VRT.

Would you rather see this money go into the pockets of the manufacturers, or into Health, Education, Social Welfare, Etc?

[Libero]

Would you rather see this money go into the pockets of the manufacturers, or into Health, Education, Social Welfare, Etc?

I take it then that you support increasing VRT even further?

[SPN]

Would you rather see this money go into the pockets of the manufacturers, or into Health, Education, Social Welfare, Etc?

I take it then that you support increasing VRT even further?

How do you draw that conclusion?

[zakalwe]

spn, you're correct, slip of my finger! and me an accountant!!!!!

as to your second point there is something inherently wrong with the tax system when you pay tax on a tax. its like being charged tax for employer paye/prsi/pension contributions on your behalf.

vat and vrt are indirect (or regressive) taxes. that means the burden of the tax weighs more heavily on lower paid people than higher paid.

if you want education and health to be adequately funded, why do you wish that the funding weigh proportionately more on those who cannot afford it?

[david]

Would you rather see this money go into the pockets of the manufacturers, or into Health, Education, Social Welfare, Etc?

I take it then that you support increasing VRT even further?

I do.

[kerrynorth]

Ombudsman,

This is not a "tax on a tax". The ESB PSO is in actual fact a subsidy to the ESB for purchasing the uneconomic peat electricity production of the midlands region, mostly around Offaly. In effect it is subsidy from the consumer to the Midlands region.

Pay VAT on excise duties as previously mentioned qualify as a "tax on a tax".

[zakalwe]

thats even worse.

i'm more sceptical of subsidies (they tend to preserve corrupt inefficient industries) than i am of high taxes.

(does that make me a PD? aaaggggghhhhh!!!!!)

[SPN]

spn, you're correct, slip of my finger! and me an accountant!!!!!

Did you ever work for Deloitte & Touche?

:twisted:

if you want education and health to be adequately funded, why do you wish that the funding weigh proportionately more on those who cannot afford it?

That is an economist's argument, not an accountants.

Anyone who can afford a new car can, by definition, "afford it". The more expensive the car the more tax the person pays. It is very proportionate.


On the other side of the argument, what taxes would you propose the Government introduce, or raise, to plug the hole left by the removal of VRT?