Should VAT go to 20%

Rochdale_Pioneers

Taxes will go up after the election. There has been a lot of debate about how to exit recession and what measures would affect this recovery for better or worse, but something will have to be taxed more than it is now.

So instead of Income Tax or business rates, how about VAT? Put it up to 20% and we raise £12.5bn a year more than putting it back to 17.5% as planned. Thats a decent slug of money for something that won't be noticed by most people (shop prices move up and down anyway with exchange rates and inflation) once the Daily Express headlines about the End Of Civilisation die away.

VAT - at a flat rate - is fundamentally regressive, hitting the rich and poor equally. But, its a tax that people can avoid paying - don't spend. We don't want everyone to spend nothing as the economy would collapse. At the same time we want to try and cap the consumer booms seen in the noughties and late 80s as they always explode. A tax on consumption would serve as that cap.

Any takers? Or people in denial about tax rises?

Graham_Devon

Not a taker, or in denial about tax rises.

But, I will say, instead of putting it up to 20%, we should have just left it at 17.5%, cus that would have created the same 12.5bn you suggest in your post

The VAT cut was a complete waste of all our time, political time and also a waste of money.

Whether or not we should put it up to 20% is neither here nor there, it will probably have to now thanks to the bumblings of Brown and Co when they thought it would be a good idea to reduce it to 15%.

kennyboy66_2

I think this is about highly likely - but will probably happen in 2 stages.

It is fundamentally regressive, but at least isn't charged on food.

It is also easy to collect and won't increase avoidance (cash in hand jobs) by much.
It might also depress imports of tat a little.

All in all, the least painful of most of the taxes.

The people it tends to affect are legitamate tradesman doing domestic jobs who compete will people who are not VAT registered.

kennyboy66_2

Graham_Devon wrote: »

Not a taker, or in denial about tax rises.

But, I will say, instead of putting it up to 20%, we should have just left it at 17.5%, cus that would have created the same 12.5bn you suggest in your post

The VAT cut was a complete waste of all our time, political time and also a waste of money.

Whether or not we should put it up to 20% is neither here nor there, it will probably have to now thanks to the bumblings of Brown and Co when they thought it would be a good idea to reduce it to 15%.

I won't go over old ground about whether the cut made any difference, but even when it goes up to 17.5% we probably still need to increase total tax take by at least £35bn PER YEAR and cut spending.

What would you suggest ?

Rochdale_Pioneers

Graham_Devon wrote: »

Whether or not we should put it up to 20% is neither here nor there, it will probably have to now thanks to the bumblings of Brown and Co when they thought it would be a good idea to reduce it to 15%.

For clarity - are you suggesting that had VAT not been cut to 15% then there would have been no need for future tax rises? I thought you said that it was utterly ineffective?

Generali

Rochdale_Pioneers wrote: »

Taxes will go up after the election. There has been a lot of debate about how to exit recession and what measures would affect this recovery for better or worse, but something will have to be taxed more than it is now.

So instead of Income Tax or business rates, how about VAT? Put it up to 20% and we raise £12.5bn a year more than putting it back to 17.5% as planned. Thats a decent slug of money for something that won't be noticed by most people (shop prices move up and down anyway with exchange rates and inflation) once the Daily Express headlines about the End Of Civilisation die away.

VAT - at a flat rate - is fundamentally regressive, hitting the rich and poor equally. But, its a tax that people can avoid paying - don't spend. We don't want everyone to spend nothing as the economy would collapse. At the same time we want to try and cap the consumer booms seen in the noughties and late 80s as they always explode. A tax on consumption would serve as that cap.

Any takers? Or people in denial about tax rises?

Better to cut spending and reduce employment by Government which will also reduce the future pension bill.

Unemployment benefit is cheaper than civil servant's salary.

Graham_Devon

kennyboy66 wrote: »

I won't go over old ground about whether the cut made any difference, but even when it goes up to 17.5% we probably still need to increase total tax take by at least £35bn PER YEAR and cut spending.

What would you suggest ?

Benefit reforms.

End of ID cards.

End of quangos.

End of the endless war to "make a point".

End of people sueing the NHS because of human error.

Should save a good few billion.

Graham_Devon

Rochdale_Pioneers wrote: »

For clarity - are you suggesting that had VAT not been cut to 15% then there would have been no need for future tax rises? I thought you said that it was utterly ineffective?

For clarity, if I had trying been trying to suggest it, I would have said it.

And no, of course I'm not saying that, stop twisting and read what I actually said. You cannot get away from the fact that the cut in VAT has left us with a 12.5bn defecit, no matter how you twist my words.

We would have been 12.5bn better off now if they hadn't had cut it. That's what I am suggesting.

Rochdale_Pioneers

Generali wrote: »

Better to cut spending and reduce employment by Government which will also reduce the future pension bill.

Unemployment benefit is cheaper than civil servant's salary.

I can cope with such a statement. We all know that there is room for efficiency savings in the civil service, which were they run privately would have been weeded out long ago.

You wouldn't want to do that right now though. Dump another million onto the dole, and yes you'd save cash on their salaries even when you factor in JSA, Council and Housing tax etc. But you'd also lose their tax revenue and their ability to spend money which the economy needs.

Once we get out of the hole, we do need to have a fundamental review of government jobs to streamline the system. But not now. If these people are in jobs that need not exist I'd rather have other jobs available for them to go into.

Otherwise you replicate disasters of the 80s - make large numbers unemployed, make no effort to create new jobs, and create a cycle of dependency. Which would cost a whole lot more than a civil servant salary and pension.

kennyboy66_2

Graham_Devon wrote: »

Benefit reforms.

End of ID cards.

End of quangos.

End of the endless war to "make a point".

End of people sueing the NHS because of human error.

Should save a good few billion.

I'd agree with all of them - however apart from benefit reforms all the rest add up to next to nothing in the grand scale of things.

We would still need to cut spending and raise taxes by much more.

The benefit system, Health, Education and Interest payments on debt probably make up 65-70% of Government spending.
It is utterly fatuous for politicians to suggest the scale of the deficit will be resolved by scrapping quangos and sacking a few civil servants.

Rochdale_Pioneers

Graham_Devon wrote: »

For clarity, if I had trying been trying to suggest it, I would have said it.

And no, of course I'm not saying that, stop twisting and read what I actually said. You cannot get away from the fact that the cut in VAT has left us with a 12.5bn defecit, no matter how you twist my words.

We would have been 12.5bn better off now if they hadn't had cut it. That's what I am suggesting.

I think we all heard that point and yes - its £12.5bn less tax generated. As a statement of fact thats pretty uncontrovercial.

I do have to pick up on your rantings above about me twisting your words. I'll repost your paragraoh in full:

"Whether or not we should put it up to 20% is neither here nor there, it will probably have to now thanks to the bumblings of Brown and Co when they thought it would be a good idea to reduce it to 15%. "

I'm twisting nothing - you suggest that the bumbling of reducing VAT to 15% means we will "probably have to" increase to 20%. I asked you to clarify if you meant that the VAT cut is directly responsible for the need to jack taxes up and you said "no".

But reading your paragraph you say quite specifically yes. You so often accuse me of twisting what you say, but actually I am just reading your posts. If you didn't mean that the VAT cut was so effective that taxes need to go up then why did you say in the above paragraph that it was?

Either the VAT cut was "a complete waste of all our time, political time and also a waste of money" or it is a decision which makes the tax rise question "neither here nor there, it will probably have to now thanks to the bumblings of Brown and Co when they thought it would be a good idea to reduce it to 15%". It can't be both. Hence my request for clarity.