Thursday 8 October 2009

We all love stealth taxes, voters and politicians alike (part 94)

From The Grauniad:

The Conservative leadership would aim to push through an emergency budget, including spending cuts and a possible rise in VAT, with the support of the Liberal Democrats if David Cameron fails to secure an overall majority in the Commons at the general election...

A rise in VAT to 20% in an immediate post-election budget would raise as much as £13bn. Shadow ministers have not ruled out the move, saying such a rise would not necessarily choke off the recovery. In his conference speech Osborne was strongly critical of the VAT cut from 17.5% to 15%, saying it had had little or no effect on stimulating the recovery. VAT is due to be put back to 17.5% after Christmas and other taxes, including a 50p tax rate for those earning over £150,000, are due to be introduced in April.


Yup, they suggest a stealth-tax rise of £13 billion (which will do more than anything to choke off the economy and divert what little resources we have left into VAT-exempt or zero-rated activities, like, er, banking and new residential construction), and nobody bats an eyelid, while waffling on about "freezing" Council Tax for two years (in other words, not increasing it from current receipts of about £25 billion), which both major parties now see as a vote winner.

Yippee.

8 comments:

James Higham said...

and a possible rise in VAT

This is garbage from the Guardian. It is the opposite. The hung parliament is no garbage though.

Mark Wadsworth said...

JH, per the evening paper "Toty MPs weren't denying they planned a hike to 20%".

Pavlov's Cat said...

I've always thought VAT was the most regressive taxes ever. Like Death duties, taxing money that has already been taxed is just greed.

What on earth they think they would achieve by raising it to 20% is beyond me, apart from as you say putting the final nail in the coffin of business in this country.

If there is a Hell, I hope Maurice Laur is having a nice time.

Mark Wadsworth said...

PC, I think "spiteful" is the word you're looking for, not "regressive" (which means that a tax is levied at a higher rate on lower incomes or lower property values). But agreed nonetheless.

Pavlov's Cat said...

spiteful is indeed the word.

So what is it? if I may ask, when a tax disportionatley affects lower incomes than higher. Say VAT whilst supposedly a flat tax for all, actually takes a higher percentage of total income of a lower earners money. Say you earn £100 and you pay £20 VAT on something that's 1/5 of your income gone, but if you earn £200 buy the same thing, pay the same £20 VAT it's only 1/10

I probsbly haven't explained myself well there, hope you get the drift.

Mark Wadsworth said...

PC, you got it right first time. VAT is (said to be) slightly regressive for the reasons you explain (although this is skewed by VAT on booze and fags) i.e. poor people pay a higher fraction of their income on VAT. I'm not convinced it is, actually, but I hate it for its stealthiness and because it's double-taxation of incomes.

Inheritance Tax is semi-regressive, it doesn't hurt people at the bottom and the people at the top find ways round it so the highest effective rate is paid by people at the upper middle.

Pavlov's Cat said...

thanks Mark , I think I was sort of getting it confused with Sales Tax as well which I think is considered a hard regressive tax.

I hate it for its stealthiness and because it's double-taxation of incomes.

Completely agree with you, I hate looking at my receipt and seeing the VAT@17.5% bit and thinking "But I've paid tax on this money, you bastards"

Inheritence Tax whether it's labelled Regressive, Progressive , Flat or whatever.
Is to me just plain wrong

Mark Wadsworth said...

PC, VAT is the same as Gross Profits Tax (the clue is in the name) is the same as Sales Tax is the same as Turnover Tax, they are all just different names for a sneaky way of grabbing money off people (whether as consumers, businessmen or employees is neither here nor) and silently choking the productive economy...

(Interestingly, when they introduced VAT in Germany they originally planned to called it "Value Added Tax" (Mehrwertsteuer) which is still the popular name for it, even though they decided the official name would be "Turnover Tax" (Umsatzsteuer) which nobody says outside of the tax profession).

... as against income tax/corporation tax which are at least honest (and not as damaging and fairly flat).