More VAT Fun

Overheard on the BBC news just now, some smart arse saying (I paraphrase) that a hike in VAT is better than an increase in income tax, because spending on VAT-able items is voluntary, but income tax is compulsory; VAT is a tax on spending but income tax is a tax on incomes.

Complete and utter f***ing tosh.

Let's put VAT-exempt and VAT-zero rated things to one side for the time being (mainly things provided mainly by the state - health and education; land based and Home-Owner-Ist sources of income - food, housing and banking; and a few Righteous exemptions - newspapers and books) most productive, wealth creating activities, those things that are based on human invention, enterprise, skills and hard work; those things which made it worthwhile rising above the level of subsistence farming, are VAT-able.

Now, it is broadly agreed that we'd like to see the economy grow, and by implication that we'd like to see a relatively larger share of national output being in the VAT-able sector, whether that's having your car repaired, having your hair cut, having a meal out and visiting the cinema, having your will drafted by a solicitor, having a new kitchen built etc.

And because we are a very advanced economy, a lot of us work as car mechanics, hairdressers, chefs and waiters, in cinemas, as solicitors or kitchen fitters etc. The people who work in those sectors (or run those businesses) derive income from it - your 'spending' is their 'income'. £100 you spend on a car repair is £100 income for a mechanic. Spending £10 on a hair cut is £10 income for the barber. £20 you spend in a restaurant represents £20 income for the restaurateur, his waters, chefs etc.

So if we took these twats at their word - and went with the myth that 'the consumer pays the tax - so it's a voluntary tax' - we'd spend less on car repairs, hair cuts etc; and the incomes of car mechanics, hairdressers etc would fall. So their income falls as a direct result of the VAT increase. Is that reduction in their incomes in any way voluntary from their point of view?

To argue that the reduction in their income is in any way voluntary is about as cretinous as the argument that while the smoking ban may have harmed the pub trade, there is nothing stopping people who used to work in pubs from getting a job somewhere else. Or that the fox hunting ban didn't hurt people who used to look after the horses and hounds and all that stuff.