Should VAT go to 20%

JasonLVC

lemonjelly wrote: »

I'd be thinking this is more of an ok idea if business' had passed on the cut in the first place when it came in. Most did't. and therefore big business has made a tidy sum where possible. My concern, will be the amount they will put prices up by.

One other thing, how would this affect inflation?

The point made above is also a good one - will this increase people working cash in hand?

I suspect the consumer will find that the retailers will have lots of "VAT held" prices. So that MP3 player you bought 31 December for £19.99 will be £19.99 in January 2010 as the retailer will absorb the difference.

When the cut came in prices went down for about a week then crept back up again, the consumer is not going to pay more due to economic climate which is why I suspect we'll see loads of 'offers' making out they are doing you a favour by keeping prices at the 'old' rate - so we'll all go out in a rush and buy plasma's in december, but they'll be the same cost in Jan I'm sure (or I'm just cynical, or both).

ziknik

Bloo_Loo wrote: »

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

Yeah, there’s a few exception for essentials and nearly essentials. There’s a 7% rate as well for silver bullion coins which doesn’t seem to fit in the rules at all.

The minimum is OT anyway. I was trying to draw some attention away from my error

http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/index_en.htm

Thrugelmir

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?

In answer to your OP taxes across the board will have to rise. This financial year the UK is borrowing £225 billion pounds. And the initial estimates of the banking crisis suggest a cost to the tax payer of £40 to £80 billion pounds for insured toxic debt in the longer term.

In 2007/8 the square mile of the City contributed £67 million in Corporation tax to the Treasurys coffers. In 2008/2009 it has been reduced to around £39 billion. A net reduction of £28 billion.

VAT circulates through the economy. If businessess didn't pass the cut on then the extra profit will be taxed in any event. Though it may have helped them pay employees who would themselves pay tax and national insurance.

VAT by itself is a headline. Part of a much bigger picture of balancing the books.

JasonLVC

http://business.timesonline.co.uk/tol/business/economics/article6689636.ece

My mistake, Cameron mentioned the VAT rise to 20% in The Times last week, not the Andrew Marr show.

JonnyBravo

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?

As a high earner it suits me.

If I become a low earner it won't suit me.

Can we change it to suit my personal circumstances? Please. :rolleyes:

michaels

I'm really surprised at this suggestion coming from you RP.

Makes sense to me with the RPI so low there is little inflationary risk and to be honest those most hard up and only able to afford food, fuel and children's clothes are not hit by this so it is really only those slightly better off who are hit hardest.

Also the announcement of VAT increases can be used as a short term stimulus to bring forward spending which may be very attractive to a govt looking for a growth bounce prior to an election...

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?