From The BBC:
French President Nicolas Sarkozy has criticised Prime Minister Gordon Brown's economic stimulus plan. In a debate on French TV, Mr Sarkozy, whose handling of France's economy has prompted protests, said the UK's VAT cut had "absolutely not worked". "Britain is cutting taxes. That will bring them nothing. Consumption continues to decrease," he said
*sigh*
To recap briefly, VAT is not "a tax on consumption", people have just been brainwashed into thinking that because it makes the tax more palatable - "production" is seen as a A Good Thing and, rather bizarrely, "consumption" is seen as A Bad Thing. It is quite simply the case that one man's production is another man's consumption. You can't have one without t'other. So VAT is not only a tax on production, it raises (in the UK) twice as much as corporation tax from a smaller section of the economy, so VAT-able businesses pay four times as much in VAT as they do in corporation tax. So a 2.5% VAT cut not only levels the playing field slightly between VAT-able and non VAT-able businesses; but for VAT-able businesses* a 2.5% VAT cut is worth as much as halving the corporation tax rate - and there's not much point cutting corporation tax in a recession - the big worry is those businesses who aren't making a profit at all, not those that are profitable.
*/sigh
Of course, The Goblin King is so f***ing clueless that he believes a) that VAT is a tax on consumption and b) that cutting VAT will stimulate 'consumption' (even if debt fuelled). Both assumptions are complete bollocks of course, but by sheer fluke, he has done the right thing, albeit for the wrong reasons.
Furthermore, The Goblin King doesn't wear platform shoes.
* At this juncture, some smartarse will comment that "I don't pay VAT because I make supplies to another VAT registered business", this itself is bollocks as well - what is important is whether those supplies end up being subject to VAT at the point of sale to the consumer - if the end supply is VAT-able, then the economic damage from the tax flows upstream to the wholesaler, the importer and the manufacturer.
That went well
11 hours ago
9 comments:
Join the black economy. You know it makes sense.
To be serious your analysis also demostrates the truism that all but all taxes (w.t.e.o. possibly LVT) depress productivity and wealth creation.
And hence I do not quite agree with you on not cutting corp tax. If you cut it on profitable businesses they will benefit and pass this benefit on in some way to all of us. Economies are after all made up of people and things. Companies (and governments) are just convenient administrative fictions by which we organise our lives. Corporation tax is a tax on us as much as income tax.
L, yes of course, but The Second Least Bad Tax is a flat tax on all incomes and profits at a uniform rate.
Making some businesses pay five times as much tax as others is just asking for trouble - hence the massive distortions in the UK towards banking and housing, which are either VAT-exempt or zero-rated.
L. Hush your mouth! You cannot, in today's society, use the word 'black'! How many more times to the pc brigade have to tell you?
From the headline I thought it was about Clarkson.
Flat tax = Tithes. (Them ancients wern't as daft as they look on the Bayeux tapestry y'know). 10% flat tax does it for me. Starting at oooo say 15K p.a.
L, seeing as you broach the topic, until a few hundred years ago, land value tax was the main source of public revenue, this can be traced back as far as Anglo Saxon times, when the land really did 'belong' to the King as representative of The People's Best Interests, only it wasn't called 'tax', it was just rent.
As to income tax, the flatter and lower the better, of course, intellectually, 0% is ideal, but that ain't going to happen any time soon.
0 percent flat tax starting at infinity.
Sarko is just so wonderful, he has had a national strike in protest about his fix for the French economy. So he can shut the you know what up I reckon. TWAT!
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