The government is now trying to work out some sort of windfall tax on banks, which is a bit daft - they shouldn't have bailed them out in the first place, but we are where we are.
Now, as we all well know, people defend The Worst Tax Of All, i.e. VAT, by saying a) It is borne by the consumer and doesn't hurt the producer; b) It is simple to administer and c) It doesn't drive businesses abroad. All of this is completely wrong, but people will insist of believing things that aren't true.
So why not slap a quasi-VAT on banks? Ask them to increase the interest rates they charge by 15% and hand that over. The borrowers won't have any problem paying that extra, will they? Just like the consumer doesn't mind paying 15% extra on a car, a cinema ticket or clothing?
So that's all dandy. 15% of an average interest rate of 6% on outstanding household borrowings of £1,400 billion would mean revenues of about £12.6 billion.
What's not to like?
Tuesday 8 December 2009
An alternative to a windfall tax on banks
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11 comments:
Having finally got to a stage in my life where I have no debt, I think it's a brilliant idea. 10/10.
:-)
Intersting point. We tax the interest that is paid to lenders so it could be argued it is double taxation, but it is still worthy of consideration nonetheless.
At first sight it also has the added advantage of damping house prices by increasing borrowing costs, which again is a good thing.
Sorry but this doesn't target Tory toffs with enough venom.
Next!
If you nationalised the banking system properly, you could collect all the interest rates as a tax on money( which is what they are but privately collected.)
As all the long wrangling over the money supply on this blog has shewn
that the banks do not on-lend customers' money at interest but create new sums in the "loan" process,such a nationalistion would only be returning the benefits of money creation (seignorage) to the people from whom the credit-worthiness of the system derives.
It seems to me that the government is providing the banks with free money and then paying them interest to borrow it back . Quite how the government creates so much new money but stays in deficit is pitiful as well as puzzling.
Time for the green bricks of enlightenment.
Alternatively, you could recognise that the City is Britain's most successful industry, and vital to our economy, and leave it alone.
I agree with you about VAT being awful. I have an idea. Let's scrap VAT and introduce a Sales Tax at say 10%. That would rake in far more than 15% or 17.5% VAT, but of course the electorate wouldn't understand and would think the 10% must be less tax than the 17.5%.
FT, GS, LFAT, this post was semi-ironic, i.e. has all the intellectual rigour of anything that politicans say.
DBC, sure, but the banks don;t just create the loan, they also have to create an equal and opposite deposit. The banks' 'seignoriage' profits are just the spread between interest received and interest paid. Quite why this is currently taxed at lower rates than productive income is a mystery to me, of course.
Adam, if our "most successful industry" requires a £850 billion bail-out, then Heaven help the rest of us!
PS, VAT is more or less the same as a Sales Tax, which is just as terrible as VAT, albeit it might be administratively simpler.
What formertory said.
Oh, and don't forget from next month it's 17.5%, not 15%. Or maybe more if The Badger feels brave.
Sky are saying the warmest year on record will be 2010.
Heard that before.
And I'm bloody freezing right now.
These eco bulbs don't give out much heat do they?
It really was a BBQ summer then in the Met Office's "Value Added" opinion.
"Quite why this is currently taxed at lower rates than productive income is a mystery to me, of course."
Because, behind the smokescreen of a windfall tax, the gov't and the banks are best mates, so they get bailed out and have to pay less, like best mates everywhere.
What's not to like? VAT.
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