Emergency Budget: VAT to rise

yorkshireman99_2

78mjt wrote: »

This won't hit consumers, it will hit small businesses. Think of any business that prices its product psychologically below a certain price point - say at £99.99. Their prices will have to go up to £102.50 to make up for the VAT, which they obviously won't do.
Therefore they'll lose £2.50 for every sale that they make. This might not sound like a lot, but if they sell say 10,000 units a month and work on small margins it could kill them. The alternative? Put their prices up and lose sales - it's a lose/lose situation.

I try to avoid buying goods priced at these obviously 'artificial' levels. Rightly or wrongly, I feel that the markup is increased to achieve these silly prices. I feel more comfortable when prices are distributed across the range.

Pennywise

Stuartli wrote: »

I don't recall too many complaining when VAT was cut for 13 months last year...:-)

Then you probably weren't looking at these boards then. I, and many, many, others were firmly of the opinion that it was a complete waste of time, would make little difference, and was a costly pain in the neck for businesses to faff around with. As it transpired, most prices didn't change, either down when it was introduced, nor up when it was taken away again. My can of coke remained the same price, as did my Mars Bar. The only real benefit could be argued to be in "big ticket" items like widescreen TVs, white goods, cars, etc., where the retailers used the VAT increase/decrease as a marketing tool, but let's face it, their prices are fluid anyway - there are always offers, sales, etc as they compete with eachother, so the jury's out on whether the VAT increase made a difference.

adidas wrote: »

Please correct me if I'm wrong, but won't a VAT increase on goods and services put up the cost of basic items (like food, childrens clothing) to be in line with other items that are VAT taxable? So the VAT increase will have some effect on pushing up all prices? I've not done any specific research on this topic but just wondered about peoples opinions.

No,shops selling food and childrens clothing will be able to reclaim VAT paid to their suppliers and on overheads, so at worst, there's just a short term cash flow impact, but ultimately, their costs and overheads shouldn't increase just because of the increase in VAT. You can also expand that all the way up the supply chain as VAT registered businesses don't actually "pay" VAT - they just collect it and pay it on behalf of HMRC and it all comes out in the wash through their VAT returns. Obviously, non VAT registered businesses will pay more, but they will also be more competitive - if their VAT registered competitors charge more, then so can they, increasing their margin, or they can choose to stay cheaper, thus increasing their market share.

At the end of the day, retail prices are worked backwards from what the customers will pay, which is based on supply and demand, i.e. competition, market forces, buyer's perception of value, etc. I don't think any manufacturer or retailer would price a product solely by applying an arbitrary mark-up to their cost. Pricing is a complex mix of many variables, VAT being just one part - others being income/corporation tax on profits, foreign exchange rates, payroll costs, interest rates, overheads, risk premium, etc. VAT is just a very small part of the equation. Price increases/inflation is more likely to be caused by worsening exchange rates, increased interest rates, etc which would be more likely if the deficit is not brought under control.

JasonLVC

liquidstool wrote: »

hey all,

sounds a bit of a silly question really but does the vat rise hit heating fuel? ie, kerosene, coal etc?

thanks

Fossil fuels for domestic heating (calor gas, kerosene, oil, etc) are all reduced rated (5%) supplies when supplied to domestic properties so no increase here either for those who use such heating methods.

jimbms

Well for us in the Isle of Man this is a good bonus, it means we will gain an extra £25m/year in common purse VAT payments from the UK which will go some way in regaining some of the monies the UK govt stole from crown dependencies last year as well as ensuring we keep a healthy surplus in our reserves and budget, all we need now is to sever all links with the UK. In reality I do believe the EEC is the biggest problem, every country that has opted out has done well, we find things work better here without any EEC directives.

JasonLVC

jimbms wrote: »

In reality I do believe the EEC is the biggest problem, every country that has opted out has done well, we find things work better here without any EEC directives.

Population of Isle of Man = 80,543

Population of Eurozone = 328,597,348

When you are dealing with over a quarter of a billion citizens, you DO need some sort of regulation.....France and Germany are doing very well within the EEC and the Channel Islands are coming under increasing pressure to fall into line with some EU regulations on disclosure of tax havens, as has Switzerland, etc and this trend will continue.

jimbms

JasonLVC wrote: »

Population of Isle of Man = 80,543

Population of Eurozone = 328,597,348

When you are dealing with over a quarter of a billion citizens, you DO need some sort of regulation.....France and Germany are doing very well within the EEC and the Channel Islands are coming under increasing pressure to fall into line with some EU regulations on disclosure of tax havens, as has Switzerland, etc and this trend will continue.

I see you are falling into the common misconception and ignorance when you call the Isle of Man nd the channel Islands tax havens, they are not what they are in fact are ofshore facilities for non domocile banking i.e. a uk citizen working for many years overseas wants a bank account in a UK bank but cannot by UK law so they use these or a person who is resident in several countries needs a domocile so they can pay tax so they use these because of the low tax.The financial regulations in the IoM and CI are far more strict than the UK or the EEC, in fact it is easier to evade tax in the UK than here, every account here, ever to us residents comes under scrutiny from several nations, the financial regulations make it almost impossible to evade tax in your resident country which is why we have a triple "A" rating, way above the UK or any other EEC nation. So I would say it is more the EEC and the UK need to improve to come up to the standard of the IoM and the CI on disclosure. If you would care to look you would see the leading cities in the world as far as tax evasion and avoidance goes are London and Delaware, this was seen by the KSF fiasco when the UK govt stole the funds from the offshore branches as the bank was about to go under and in such stealing the savings of a lot of expats. The main reason we have surplus funds and low tax is not due to any tax avoidance but the fact we have a work permit system where residents get priority and a social system where unless you have been here 5 yrs you get no handouts, and even if you have, you have harder tests to prove you can't work, hence unemployment around 1.6% no scoungers, low crime. Yes our population is lower but pro rata percentage of monies spent on things like health and roads is higher but taxes can be low because there are no big drains on society. So before you go spouting off the tax haven rubbish you should look towards where you live which is a proven centre of international tax avoidance and is struggling to keep an A rating never mind a AAA. So it's about time the UK and EEC fell into line with our high standards of financial disclosure.

JasonLVC

jimbms wrote: »

I see you are falling into the common misconception and ignorance when you call the Isle of Man nd the channel Islands tax havens, they are not what they are in fact are ofshore facilities for non domocile banking i.e. a uk citizen working for many years overseas wants a bank account in a UK bank but cannot by UK law so they use these or a person who is resident in several countries needs a domocile so they can pay tax so they use these because of the low tax.The financial regulations in the IoM and CI are far more strict than the UK or the EEC, in fact it is easier to evade tax in the UK than here, every account here, ever to us residents comes under scrutiny from several nations, the financial regulations make it almost impossible to evade tax in your resident country which is why we have a triple "A" rating, way above the UK or any other EEC nation. So I would say it is more the EEC and the UK need to improve to come up to the standard of the IoM and the CI on disclosure. If you would care to look you would see the leading cities in the world as far as tax evasion and avoidance goes are London and Delaware, this was seen by the KSF fiasco when the UK govt stole the funds from the offshore branches as the bank was about to go under and in such stealing the savings of a lot of expats. The main reason we have surplus funds and low tax is not due to any tax avoidance but the fact we have a work permit system where residents get priority and a social system where unless you have been here 5 yrs you get no handouts, and even if you have, you have harder tests to prove you can't work, hence unemployment around 1.6% no scoungers, low crime. Yes our population is lower but pro rata percentage of monies spent on things like health and roads is higher but taxes can be low because there are no big drains on society. So before you go spouting off the tax haven rubbish you should look towards where you live which is a proven centre of international tax avoidance and is struggling to keep an A rating never mind a AAA. So it's about time the UK and EEC fell into line with our high standards of financial disclosure.

I cannot recall saying the IoM was a tax haven in my post. So no 'misconception' or 'ignorance' on my behalf. I referenced the CI and Switzerland to show how the EU are pushing their policies onto non-Eurozone countries.

I have many clients 'based' in IoM, most of whom took advantage of the VAT loophole with yacht chartering and there are several other well-known tax scams operating out of IoM.

Are you also suggesting that the IoM is not a tax haven? - just that, the IoM government seem to promote the island on the basis of none or very low CGT, SDLT and income tax - the defintion of a tax haven.

Perhaps you're getting confused with IoM not appearing on the UK's blacklist of tax havens, instead appearing on the white list by virtue of agreeing disclosure to the UK (http://www.iomtoday.co.im/politics/Isle-of-Man-avoids-tax.5137503.jp), much like the CI and Switzerland. Agreeing to disclose suggests they did not disclose previously, which is another indicator of a tax haven.

You make reference to tax evasion in London/Delaware. Tax havens are not tax evasion, they fall under the tax planning definition. Kaupthing bank collapsing in the IoM is a seperate discussion matter but if as you suggest IoM has such tight banking rules, how then, did Kaupthing collapse? The UK government considered the bank insolvent did it not and refuse to indemnify against its liabilities?

I've not 'spouted' a load of rubbish. Have a look where I live (hint, Switzerland) - famous for low taxation and EU autonomy and arguably many times nicer than both the UK and IoM;)).

jimbms

It seems we have a different definition of tax haven, we class here and CI as offshore financial centres and the VAT situation on yachts is not a scam as it is fully legal, as well as CI we are also proud to ne non EEC, as for KSF the reason it collapsed here was the UK classed the IoM branch as just that a branch of the UK division and siezed all its assets then refused to honour IoM investors whereas if they had not done that there was sufficient funds here to cover the IoM section so in effect the UK bypassed the IoM FSA, as for the disclosure, we have subscribed to that from day one, as stated we are one of the very few banking centres to have a AAA rating, I believe the UK is so low it is not even on the clean rating system, yes we do have low tax for residents, why not we make enough out of the finance sector without having to rob everyone blind. The link you referenced was given at the point the white and black list was instigated and was just confirmation of what was already know i.e. we have always had a open banking system. Anyway the main point is we are now going to get some of that vat from the common purse the UK robbed from us, as for CZ being nicer then the UK or IoM I shall only agree on the UK bit mind you any country with ten bob in it's pocket is atm

JasonLVC

jimbms wrote: »

It seems we have a different definition of tax haven, we class here and CI as offshore financial centres and the VAT situation on yachts is not a scam as it is fully legal, as well as CI we are also proud to ne non EEC, as for KSF the reason it collapsed here was the UK classed the IoM branch as just that a branch of the UK division and siezed all its assets then refused to honour IoM investors whereas if they had not done that there was sufficient funds here to cover the IoM section so in effect the UK bypassed the IoM FSA, as for the disclosure, we have subscribed to that from day one, as stated we are one of the very few banking centres to have a AAA rating, I believe the UK is so low it is not even on the clean rating system, yes we do have low tax for residents, why not we make enough out of the finance sector without having to rob everyone blind. The link you referenced was given at the point the white and black list was instigated and was just confirmation of what was already know i.e. we have always had a open banking system. Anyway the main point is we are now going to get some of that vat from the common purse the UK robbed from us, as for CZ being nicer then the UK or IoM I shall only agree on the UK bit mind you any country with ten bob in it's pocket is atm

The UK is a triple 'A' rated country is it not? - well at least it was yesterday http://citywire.co.uk/money/moodys-says-uks-credit-rating-is-supported-by-budget/a409286 - the exact same rating as the IoM (technically IoM does have a 'stable' rating against the UK's 'negative' but the outcome is still AAA)....or are you referring solely to individual banking instituitions?

The yacht 'scam' was legal in that it exploited a loophole in the law. But if it was kosher, then the IoM wouldn't have agreed to co-operate with the UK authorities and stem this loophole - http://www.tax-news.com/asp/story/story_marine.asp?storyname=42994 - it was an abuse of law at the end of the day.

Tax Haven is a taboo word in the current economic climate and the opinon of some has shifted I suppose from 'a low tax country' to "a country which doesn't comply with international disclosure agreements" (the dreaded black list, of which there are no jurisdictions on it at present) so I agree we're probably at crossed purposes.

As for Switzerland, we've got more trains and mountains than you:p;)

jimbms

Ah but we have the TT, but we both have more money than England

P.S. I stand corrected on the AAA UK rating for now