Killer Arguments Against LVT, Not (422)

That Facebook conversation started with this:

Hello! I would love to get some feedback on an idea I've been thinking of. Today the Tories attacked irresponsible big business, but I believe it's the government's job to adequately tax business and not to pick any winners if we're not getting enough money from them, that's the government's fault not the companies'.

I have always thought having a £2,000.00 VAT refund per person would be good and there's plenty of articles to support this, it would encourage people to collect VAT receipts for any purchases and likely increase the total taxation and lead to less tax evasion...

I've read some interesting articles proposing raising VAT to 40% and ridding all other tax's and they offer just as convincing an argument as [those for LVT].

That's supposed to be a sane alternative to LVT, is it? The proposal is fundamentally flawed on very many levels.

1. There is no need to match any particular item of government spending with any particular kind of taxation, as long as the totals roughly match up. A Citizen's Dividend of £2k a year each is just a Citizen's Dividend, and VAT is just VAT. People who believe that National Insurance is a good tax because it goes towards old age pensions and/or pays for the NHS need their heads examining (but preferably not on the NHS).

2. Flat rate universal welfare payments/tax rebates would be a good replacement for the bulk of the welfare system (excl. disability related stuff) and various tax breaks/allowances, no need to worry how it's funded (in isolation).

3. When he talks about "a VAT refund" and people collecting "VAT receipts", this suggests a system like they have/had in Turkey (according to my Turkish friend). When you do your own tax return at the end of the year, you get a tax deduction for a certain amount of private spending, as long as you provide actual receipts. In which case this would not be a Citizen's Dividend - the rebate would be larger for people who spend more than the limit and lower for really low earners/spenders who don't. So presumably high spenders would be able to sell spare receipts to low spenders for a share of the value of the extra tax rebate they can claim. Either way, it's a shed load of extra paperwork and opportunities for fraud.

4. VAT is the most damaging tax (favoured only by Faux Libertarians and Puritans), facts and logic tell us this. They also tell us that VAT is largely borne by producers (owners and employees alike) but that's another topic. The incentive to evade it is the same no matter which particular item of spending it is nominally matched with, and as we know, it is not primarily domestic UK businesses who evade it, it is international conglomerates that route sales offshore somehow. All those receipts that people collect would be from high street retailers etc who by and large cough up the VAT (their systems being computerised thus making underpayment easy to detect). Businesses who currently don't pay the full amount of VAT - be they evaders or magically exempt (banks, landlords, private schools etc) - still wouldn't.

5. With a UK population of about 65 million, an annual rebate of £2,000 each would 'cost' £130 billion, which is more than total VAT receipts. Perhaps tax compliance would improve slightly, but nowhere near enough to make up the shortfall.

6. Those arguing in favour of 40% are the Faux Libertarians, Puritans and idiots generally. It would be massively regressive and damaging to the economy. I have read lots of such articles and they are addle pated nonsense. I have read endless articles in favour of LVT, most of which are pretty convincing.

So that's my feedback.