Tackle UK debt love affair with 'spending tax'

JP45

Thrugelmir wrote: »

Do you have any alternative suggestions as to how to change the culture of the UK?

Sometimes using "a stick rather than carrot" is the only way of implementing change.

I agree with Skeoch on the issue of debt. When he says:

...the medium term focus for policymakers must be to reduce the dependency of economic activity on both consumption and debt

and that

banks should no longer be rewarded for creating financial products that encouraged people to take on debt - such as credit cards and loans - and which also increased their own risk.

The point about debt seems fine, but why extend the argument to controlling consumption as well as debt. He seems to be advocating some sort of fundamental shift in the burden of tax from income to expenditure, as in the following:

'One radical option that I personally believe should be given serious consideration is a switch to an expenditure tax. 'Spending rather than income would be taxed and such a system can be made every bit as progressive as the current system, with appropriate protection for those on low incomes.'

I wouldn't object to an increase in VAT to say 20% (post recession), which I believe would bring us more into line with the equivalent tax rates on the Continent, but I cannot see the benefit, need or justification for a fundamental shift from income to expenditure tax.

He ends by saying:

'The best way of avoiding the next big bust is to help shape the quality of the coming upswing (in economic activity), and that must involve reducing its dependency on debt-financed consumption,' he said 'It should be a major plank of policy of whatever government takes office.'

He seems to recognise himself that the problem is not expenditure as such, but debt-fueled expenditure. It's debt that needs to be controlled rather than expenditure. The fact is it's been far too easy for people to obtain credit and run up ruinous levels of debt over the past 10-15 years. Surely that's what needs to change.

Radiantsoul

I am not sure that taxes(unless really high) will have much effect. Marginal adjustments are not likely to make a massive difference. The 2.5% cut in VAT had an impact, although those that opposed it argued that it was trivial. So it seems to make a difference that increases UK savings by 10% you might need to raise VAT by a very large amount, certainly to way over 20%. I suppose you could drop income tax by a large amount and pump VAT up to 30%+.

I do wonder if the credit crunch will have tipped people towards higher savings and lower spending. Whether the will disappear when credit begins to flow or whether people will genuinely wish to build larger balances in future will be interesting to see. But there seems to be more uncertainty in the world and that might encourage saving.

lostinrates

Radiantsoul wrote: »

I do wonder if the credit crunch will have tipped people towards higher savings and lower spending. Whether the will disappear when credit begins to flow or whether people will genuinely wish to build larger balances in future will be interesting to see. But there seems to be more uncertainty in the world and that might encourage saving.

I don'tthink so, yet.

dopester

The consumer accounts for two-thirds of the economy.

Spending will retrench even without additional taxes.

Access to credit denied to bad risks. Good risks wanting to pay down debt and take on less new credit.

The BoE want velocity of money/credit to go up against all this, and an extra tax isn't going to help with that. Too little too late, when years ago it might have helped with a better balance of spend/saving.

fc123

The_White_Horse wrote: »

if you want to stop people getting into debt, stop making bankruptcy such an easy get out and bring back debtor prisons. people get into debt because generally, they don't care. what is the worst that can happen to someone??

That's not 100% true in every case.
White Horse...in every situation there are so many variables yet you seem to plonk into your posts a kind of generic 'one size/scenario fit's all' and apply it to everything.

I believe (now I have mountains of hindsight) that we got ourselves into debt for our business because we cared......I didn't want to lay off a staff team and shut something down. And it's not different debt for a business as we are a small business and our debt was taken out in our names...not under cover of a Ltd Company.

In fact, now I think back to those we tried to keep in nicey nicey jobs with neverending, full benefits type, old school contracts, I kick myself for being so bluddy nicey myself. Very expensive.

The generalising on this board is really getting on my......whatevers.

Sorry for being blunt but I just got in, my blood sugar levels are through the floor and so I need to eat now...and the nice large glass of red wine has gone whoosh and has hit the spot.

BTW white horse, have you ever employed anybody directly? Not subby, not a plumber for a bathroom fit but 40 hours per week 52 weeks a yr and so on.

fc123

nearlynew wrote: »

I love the way McVities won this case....

They claimed that, when stale, biscuits go soft and cakes go hard.
So because jaffa cakes go hard they were accepted by the judge to be cakes, so no vat is payable.

briliant.

We have just introduced a size 6 ...it is micro. It isn't for anorexic customers but for petite Japanese/asian customers...perfectly healthy just petite in proportion.

The factory 'phone me in a panic....''hey FC these patterns won't fit anyone over the age of 11...are they kids?' 'Nope' I replied.
'Shame' he said....you should be selling them as kids and have them as VAT exempt.
The Vat rules have a huge list of measurements to work out if something qualifies for VAT.

Wasn't there are problem with larger sized school uniform being challenged as it didn't meet the VAT spec for vat exempt status?


Collecting more tax through higher VAT is fraught with problems...not least because some traders will be able to fiddle it.

michaels

Sounds like one for the tax accountant at Ann Summers to argue

After all its not just biscuits that get soft when things get stale...

fc123 wrote: »

Wasn't there are problem with larger sized school uniform being challenged as it didn't meet the VAT spec for vat exempt status?

fc123

michaels wrote: »

Sounds like one for the tax accountant at Ann Summers to argue

After all its not just biscuits that get soft when things get stale...

Ha de Ha...It's Friday so I forgive you.......no, the big uniforms were because kids are much bigger nowadays.
Too much sitting, being driven abround and KFC, not enough freezing houses, walking 3 miles to school and eating healthy bone stews and stuff (which was why we were thinner in the 70's).