Should VAT go to 20%

Cannon_Fodder

I'm curious.

After the biggest quarterly job losses on record (since 1971 iirc), how exactly did the stimulus of the VAT cut help businesses?

CLAPTON

Cannon_Fodder wrote: »

I'm curious.

After the biggest quarterly job losses on record (since 1971 iirc), how exactly did the stimulus of the VAT cut help businesses?

The concern was that unemployment would increase to very high levels...
various policies (including the VAT decrease) were actioned to try to mitigate the rise in unemployment.
As we have only one reality whatever course of action (or inaction) is taken we can only speculate what would have happened if other things were tried.
So it could have been massively worse (or not of course)

kennyboy66_2

ziknik wrote: »

I don’t think the UK can put VAT above 19%. I believe EU Law limits VAT to between 15-19%.

We will go to 17.5% on New Years day and then 19% soon after the next election in an emergency budget

Is that true?

I thought VAT in Ireland was 21.5% and 21% in Belgium.

kennyboy66_2

Cannon_Fodder wrote: »

I'm curious.

After the biggest quarterly job losses on record (since 1971 iirc), how exactly did the stimulus of the VAT cut help businesses?

No one can really know exactly but the £12.5bn must have had some effect.
It could have been lower prices for customers (who then save or buy more).
It could have meant companies made more profit (and pay more tax & dividends)
Or it could have allowed them to keep an employee rather than make them redundant.

The VAT stimulus caused millions of small effect, that ultimately add up to more jobs (or less cuts), higher profits or lower prices.

To argue that it has a cost, but no effect is peverse.

Probably.

Rochdale_Pioneers

Cannon_Fodder wrote: »

I'm curious.

After the biggest quarterly job losses on record (since 1971 iirc), how exactly did the stimulus of the VAT cut help businesses?

I don't know - how do tax cuts normally help businesses?

JayScottGreenspan

kennyboy66 wrote: »

Or should the NHS offer "alternative medicine" (ie it doesn't actually work) like homeopathy.

Yeah, the stuff that actually does work gets appropriated by medical science - they're quite pragmatic like that. Little of the medicine of 3000BC has survived, but willow bark extract has been tested... and as a result we have aspirin these days. In the old days it was so hit and miss that untreated patients often had a higher survival rate - some of the treatments helped, some did nothing, some were fatal in and of themselves!

Almost by definition what's left in the realm of "alternative medicine" either doesn't work, or is no more likely to work than any treatment you or I just randomly made up here and now.

http://www.youtube.com/watch?v=HMGIbOGu8q0
"I just can't stand losing them."
"It happens."
"I don't know, sometimes I think a trace solution of deadly nightshade or a statistically negligible quantity of arsenic just isn't enough."
"But that's crazy talk Simon. Okay, so you kill the odd patient with cancer or heart disease, or bronchitis, flu, chicken pox or measles, but when someone comes in with a vague sense of unease or a touch of the nerves, or even just more money than sense - you'll be there for them, bottle of basically just water in one hand, and a huge invoice in the other."

Norfolk_Jim

I suspect the whole idea of the cut to 15% was to have a ready made excuse for putting it up to 20% at a later date to "recoup" the lost tax that helped us in our time of need, at least thats what the politicians will say.
Taxes on spending are better than taxes on income for the likes of me, a typical median earner, as I have the option to avoid paying the tax by not spending and can benefit from being more independant and less wasteful

ziknik

kennyboy66 wrote: »

Is that true?

I thought VAT in Ireland was 21.5% and 21% in Belgium.

A quick Goolge search suggests you are right.

That must mean I am wrong.

The article below states 15% to be the lowest VAT allowed in the EU……. I can’t remember where I got the 19% from. It must be wrong anyway.

Thanks for the correction

http://uk.reuters.com/article/idUKLNE4AN02Q20081124?feedType=RSS&feedName=personalFinanceNews
LONDON (Reuters) - Chancellor Alistair Darling cut value-added tax by 2.5 percentage points to 15 percent on Monday, the lowest allowed under European Union law, in a bid to kick-start the economy.

Bloo_Loo

ziknik wrote: »

A quick Goolge search suggests you are right.

That must mean I am wrong.

The article below states 15% to be the lowest VAT allowed in the EU……. I can’t remember where I got the 19% from. It must be wrong anyway.

Thanks for the correction

http://uk.reuters.com/article/idUKLNE4AN02Q20081124?feedType=RSS&feedName=personalFinanceNews
LONDON (Reuters) - Chancellor Alistair Darling cut value-added tax by 2.5 percentage points to 15 percent on Monday, the lowest allowed under European Union law, in a bid to kick-start the economy.

I beleive VAT on gas and electric are 5%, and postage stamps are 0%.

JasonLVC

The standard rate of VAT cannot go below 15% across the EU so we've got it as low as it can go.

RP's original post asked whether it would go up to 20%. Absolutely, without a shadow of a doubt. Cameron mentioned it briefly last week on the Andrew Marr Show (of course, the spin is that he HAS to raise it as Brown has left Britain stoneybroke) but it'd have to go up anyway in the long-term to harmonise with the other EU states who are generally around the 19% mark or higher.

Ireland raised their VAT by 0.5% December 2008 whilst we were dropping ours by 2.5%. Hungary and Romania are considering raising VAT too.

As a tax, VAT is growing in popularity, Saudi introduced it last year, India are considering it now and there is talk that the USA will introduce it if Obama gets a 2nd term (too radical a change in 1st term!).

Was the 15% cut any good. Probably not. No matter how cheap goods are, if you've got no job/money/home you ain;t going to be spending money.

Where it will be interesting is in December 2009, will people want to buy expensive goods then before the price rise in January?. I suspect there could be a bigger rush in December than there was when it was cut last December.