From The Grauniad:
Professor Mike Devereux, director of the Oxford University Centre for Business Taxation, says the chancellor should announce a rise to a higher rate [of VAT] but delay it until 2012...
According to Devereux, an increase in VAT has another advantage over other tax rises because it is harder to avoid: "Unlike income tax and corporation tax, [a rise in VAT] should not induce individuals or corporations to move abroad ... because the tax is primarily determined by the location of the consumer."
Twat, twat, twat.
The bulk of the UK economy is entirely domestic - UK residents work for UK businesses supplying goods and services to UK consumers, and it is the damaging effects of taxes on the purely domestic economy we should worry about first. It's not much consolation to a hair-dresser or a car-repair workshop or a pub, who have to hand over 15% of their turnover in VAT* to tell them "at least this tax doesn't encourage you to move abroad".
It's not as if people will travel abroad to have their hair cut, car repaired or to enjoy a swift pint, so whether the hairdresser, car mechanic or pub has to hand over VAT or income tax or corporation tax is completely irrelevant. Further, if these people knew that other countries had lower rates of VAT or none whatsoever, wouldn't it encourage them to relocate there? So it's all well and good him saying "should", that's like saying "people shouldn't murder people", yeah, I know they "shouldn't" but unfortunately they do, whether you like it or not.
The mercantilists say "Imports bad, exports good", and therefore that imports should be taxed more heavily than domestic production - but this is not a justification for VAT (which clobbers domestic and foreign producers alike), this is a justification for import duties.
As a staunch opponent of protectionism, I see no reason for having import duties either (which are historically very low, to be fair), so this makes VAT a doubly bad tax - it is a very crude tax that is supposed to (but fails to) discourage imports, which are A Good Thing in and of themselves anyway. We export the surplus of whatever we can produce cheaply but don't need, and import stuff which others can produce more cheaply than we can. What's not to like?
If we are to argue in favour of taxes on things that cannot be shifted abroad and which do not "induce individuals or corporations to relocate abroad", then how about replacing as many taxes as possible with a tax on ..?
* No doubt somebody is dying to say "But they can reclaim their input tax!" but that is bollocks as well. The business hands over 15% of his turnover in VAT, full stop. Some goes directly to the taxman, and some is paid to its own supplier, who in turn hands it over to the taxman (your input VAT is somebody else's output VAT). Sure, there is netting off, but the total VAT handed over by all the businesses in the chain from raw materials to retailer is pretty much equal to 15% of the gross turnover of that chain, i.e. the end-selling-price to the consumer.
Another poor decision
4 minutes ago
14 comments:
In terms of business taxation, it's certainly not harder to avoid than business rates, but he seems to have falsely limited his options to VAT vs income tax vs corporation tax.
I think he's talking about advantages to the Gov't, not advantages to the taxpayer or the economy......
You really wonder about people like Prof Twat. There are far better tax schemes and he chooses the worst variant.
I may have mentioned before that I hope there is an especially hot spot in Hell for Maurice Laure
I think I may have solved the problem of how the next government can raise all the tax it will need to defray its debts. It just has to identify everyone who has revealed himself to be a leftie over the last dozen years, and confiscate all his wealth.
I don't myself see any weakness in this scheme. It could be called the Social Justice tax.
Paul, do you mean "easier" rather than "not harder"? Let's not forget that VAT carousel fraud is running at somewhere between £2 billion and £8 billion a year in the UK alone, which is an actual cash cost. On top of which is the notional cost of all the businesses who just don't pay in the first place and the businesses who simply can't pay because the VAT bill has put them out of business.
B, to be fair, a tax that is impossible to avoid (i.e. LVT) is of advantage to the honest taxpayer, because he doesn't have to pay the extra bit to make up the shortfall that other people evade.
JH, PC, so are you agreed that VAT is The Worst Tax?
D, that has intellectual merit, but would be administratively unenforceable. Far better to cut off future funding for quangista (i.e. a 100% tax) and have done with it.
I would say morally that Death Duty
( or as we are now supposed to call it Inheritence Tax, in that Windscale/Sellafield way the Govt loves) is the worst tax.
But being as very few these days are left enough money by the Govt to qualify.
Speaking as an end-payer, yes VAT is The Worst Tax, any Tax on money that has already been taxed is wrong, it is also a Regressive Tax
PC, personally, I find Inheritance Tax particularly spiteful, especially as it only raises about as much as the TV licence fee (which itself is despicable for being a) a Poll Tax to b) fund propaganda) but neither of those taxes causes unemployment or business failure in the same way as VAT (which raises twenty times as much).
"would be administratively unenforceable": nah, just promise the administrators a tithe on the income, and they'd have it working in weeks.
D, in which case I would apply for a tax collection licence and go round denouncing everybody I don't like as a leftie ... can you see where this might lead?
Oh no, the Court of Public Opinion will guard us against misidentification. Or the Lefty Tsar.
Actually, I hereby volunteer to be the Left-Finder General.
High taxation is already driving people to bartering and purchasing second-hand goods. Upping VAT from an already extortionate 17.5% would push many over the edge.
Like OH, I now brew my own and make/barter wherever possible, as a protest.
The US is introducing a bartering tax (no kidding) with hefty penalties non-compliance. Were Labour to remain in power, it wouldn't take them long to get round to it.
"High taxation is already driving people to bartering and purchasing second-hand goods."
AFAIK, second-hand goods are liable to VAT. The only reason you rarely pay it is that most second-hand stuff is bought privately, i.e. effectively from a non VAT-registered trader.
The prof just proves my general theory of buggeration that most of the troubles in the world stem from the thoughts and actions of clever idiots. The 'intellectually autistic' if you prefer.
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