There's been an outbreak of common sense at the Federation of Small Businesses. From the BBC:
The FSB is urging VAT be cut to 5% in the construction and tourism sectors. "Consumer demand is a key barrier to economic growth so such a cut would encourage people to spend in these areas," the FSB said in its Voices of Small Business Report.
The FSB said: "Evidence from other EU countries shows that any lost revenue to the Exchequer by making VAT cuts will be met by earnings from additional demand, jobs and the wider economic activity."
Although the basic EU rule is that the standard rate of VAT has to be at least 15%, it appears that countries can reduce the rate on specific sectors, which is what Ireland seems to have done recently. So far so good. The depressing bit is right at the end of the article:
A Treasury spokesperson said: "Reduced VAT rates of the kind suggested would make a significant impact on revenue. Any claim that a boost to foreign tourism or construction would outweigh these effects would need to be looked at very carefully indeed."
In other words, they didn't give these secondary effects any thought whatsoever when they hiked VAT from 15% to 17.5% to 20%, did they? Even Ed Balls seems to have finally grasped that you cannot keep merrily increasing VAT and expecting overall tax receipts to keep going up, for crying out loud.
Monday, 18 July 2011
Treasury Tomfoolery
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8 comments:
When I was a child I think the purchase tax was either 5% or 6%. Don't you think 15% is incredibly excessive? Let alone 20%. It's a blatant rip off with direct tax being so high.
C, yup. VAT is my most hated tax because it is the most dishonest (Mr G Brown boasted about the basic rate of tax going down to 20%, but you pay as much again when you spend your money, which the politicians fob off as a 'tax on consumption') and because in real life it destroys more jobs or businesses than even Employer's NIC.
VAT (IVA) in Spain is 8% on hotel stays. Although I'm not sure whether it's 0-rated in the UK. At least, when I booked a room for 8 weeks at a hostel, they had to charge 17.5% for the first 4 weeks, and 0% for the rest. But they had to work out how much of my rent was spent on their catering and charge 17.5% on that.
Mark at least VAT is called a tax. Employers' NIC tries to pretend to be an insurance premium, which makes it even more dishonest than VAT in my book.
Anon, hotels in the UK are fully VAT-able but there is a funny reduction for long-stay guests as you explain.
B, yes, VAT is called a tax but the pol's insist it is a tax on 'consumption', when it's actually a tax on gross profits ("value added" the clue is in the name). Either way, VAT is far worse than NIC because at least all businesses have to pay NIC but only half of businesses have to pay VAT.
So if having the same flat tax rate on all businesses is A Good Thing, VAT has to be first to go.
"Anon, hotels in the UK are fully VAT-able but there is a funny reduction for long-stay guests as you explain."
That seems logical: if you stay more than four weeks, you have become a sort of tenant and rents are zero-rated because the country is run by rentiers.
Nice fantasy, not going to happen.
Unless those who make and do in this nation decide to do it for themselves.
All stop collecting VAT. Drop their prices by half of total VAT collected but keep the other half as a levy to finance self-protection against the states thugs. Half of the take in from the UK's VAT rip-off is a lot of cash and would hire more than enough muscle to duke it out in the street with the states agents.
As the state gets weaker the process could be shifted into all of the assorted thievery that so-called govt gets away with.
Just a thought.
"Drop their prices by half of total VAT collected but keep the other half as a levy to finance self-protection against the states thugs."
You wouldn't need to. If everyone refused to pay VAT on the grounds that they hadn't charged it, the state would be buggered. Firstly, there would not be enough thugs to even make a start on the non-payers and secondly, not charging VAT is different from charging VAT but not handing it over to the state.
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