Should VAT go to 20%

bo_drinker

It's set to return to 17.5% in January. So a 2.5% hike will not be such a blow on paper when it does go to 20% because it will, when is another question, maybe Gordy will leave that to Dave to bring in. Lowering it was a complete waste of time for the man in the street, and what did it do for business maybe shaved a little off their returns, certainly didn't make great waves. It was a suck and see operation that was pointless. If I saved a tenner in all that time it was @15% I would be surprised.

PS. They will need to make up for the increased tax evasion that will be happening over the next few years.

JayScottGreenspan

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?

I think this is a very fair question, and the sort of thing our politicians should be debating. They won't, of course, because it would ruin their election campaigns.

VAT seems the easiest candidate. Top rate tax raises little revenue, and basic rate tax would be a much more unpopular candidate than VAT.

Personally I'd also up IHT and apply it to trusts. That'd raise a few billion, and it'd be funny to see rich people paying IHT at the same rates as normal people - imagine the kids having to sell the £20m country pile in order to pay the tax bill! In reality the rich would probably just have to spend more on life insurance to pay the tax bill - as long as they pay the tax it works for me!

While we're at it, higher CGT and full council tax on second homes would raise a few pence.

CLAPTON

bo_drinker wrote: »

It's set to return to 17.5% in January. So a 2.5% hike will not be such a blow on paper when it does go to 20% because it will, when is another question, maybe Gordy will leave that to Dave to bring in. Lowering it was a complete waste of time for the man in the street, and what did it do for business maybe shaved a little off their returns, certainly didn't make great waves. It was a suck and see operation that was pointless. If I saved a tenner in all that time it was @15% I would be surprised.

PS. They will need to make up for the increased tax evasion that will be happening over the next few years.

It's purpose was to pump £12.5bm into the economy to increase demand and reduce the rise in unemplyment i.e to make each family about £1,000 better off (depending upon how many family units you allow.)

The stimulous to spending of £100 purchases being £2 cheaper was just nonsense newspaper talk who assume that most people wouldn't understand the economic impact of 12.5bn slossing about.

Rochdale_Pioneers

What puzzles me about the various arguments about VAT is the notion of the cut to 15% having been pointless or ineffective. These arguments usually come from people who want to see taxes cut and government spending cut.

The 15% cut has an effect with two ends of the scale - at one end the £12.5bn is pocketed by business, at the other end the £12.5bn is pocketed by the consumer. In reality we were somewhere in the middle - clear cuts in prices early on (and a corresponding increase in consumer spending), but all quiet since as retail prices have moved due to other factors, removing the clear signs of the VAT cut (like £12.74 price points).

But here's the thing. £12.5bn was taken from taxes and given to a mixture of taxpayers or businesses at a time when we needed both to keep spending and not run out of cash. Low tax proponents (my friends on the right) seem to be arguing both for low taxes AND against this tax cut. Or are some tax cuts bad (IHT) and other bad (VAT)?

Does someone on the right want to square this circle in a way that doesn't admit to the objection being down to political opportunism?

Landprofits

Perhaps more intelligent and sensible decisions as to how and where Taxpayer's money is spent would be a better solution?

JayScottGreenspan

Rochdale_Pioneers wrote: »

What puzzles me about the various arguments about VAT is the notion of the cut to 15% having been pointless or ineffective. These arguments usually come from people who want to see taxes cut and government spending cut.

The 15% cut has an effect with two ends of the scale - at one end the £12.5bn is pocketed by business, at the other end the £12.5bn is pocketed by the consumer. In reality we were somewhere in the middle - clear cuts in prices early on (and a corresponding increase in consumer spending), but all quiet since as retail prices have moved due to other factors, removing the clear signs of the VAT cut (like £12.74 price points).

But here's the thing. £12.5bn was taken from taxes and given to a mixture of taxpayers or businesses at a time when we needed both to keep spending and not run out of cash. Low tax proponents (my friends on the right) seem to be arguing both for low taxes AND against this tax cut. Or are some tax cuts bad (IHT) and other bad (VAT)?

Does someone on the right want to square this circle in a way that doesn't admit to the objection being down to political opportunism?

Yeah, totally agree, and those people saying the cut to 15% was 'pointless' are often the people who would protest against it going to 20% like that would be the end of the world.

I think the 15% cut was a mistake because we couldn't afford it, but I won't deny that it was a stimulus.

MrDT

Did anyone ever genuinely expect VAT to go back up to 'just' 17.5%

Generali

Rochdale_Pioneers wrote: »

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.

I see the current situation in the UK as being very similar to the early 80s - lots of people employed in jobs where they aren't producing wealth for the nation but instead are a drag on the productive part of the country.

That needs to be addressed fast - the mistakes of the 70s have been repeated by another Labour Government. The fix will be as unpleasant this time as last but sadly necessary.

Rochdale_Pioneers

MrDT wrote: »

Did anyone ever genuinely expect VAT to go back up to 'just' 17.5%

Thats the number going into all my 2010 planning spreadies, yes.

Its easy to overtype though - all VAT calcs reference to a single cell this time. Had a nightmare trying to find all the +/- VAT formulas last time.

Rochdale_Pioneers

Generali wrote: »

I see the current situation in the UK as being very similar to the early 80s - lots of people employed in jobs where they aren't producing wealth for the nation but instead are a drag on the productive part of the country.

That needs to be addressed fast - the mistakes of the 70s have been repeated by another Labour Government. The fix will be as unpleasant this time as last but sadly necessary.

You don't recognise that the cost of a "fix as unpleasant this time as last" will be far higher than the savings? Large scale prolongued untempered unemployment for some reason has rather a damaging effect on the facbic of society, scars that cost money for decades after the cost savings liquidated from the job losses have been banked.

I'd have thought that we'd learned that lesson the hard way. Apparently not...