MSE News: Government defends VAT rise

savemoney

According to DM the rise is permanent

http://www.dailymail.co.uk/news/article-1343830/George-Osborne-defends-20-VAT-rise-stores-mask-price-hike.html

The VAT hike will be 'permanent', George Osborne said today as he defended the tax jump as 'reasonable'.

Dont worry we are all in it together, vat tends to hit the poor disproportionately no surprise given Tories past history

JasonLVC

savemoney wrote: »

According to DM the rise is permanent

http://www.dailymail.co.uk/news/article-1343830/George-Osborne-defends-20-VAT-rise-stores-mask-price-hike.html

The VAT hike will be 'permanent', George Osborne said today as he defended the tax jump as 'reasonable'.

Dont worry we are all in it together, vat tends to hit the poor disproportionately no surprise given Tories past history

Tories past history/media mumbo jumbo or is it part of a much grander European scheme as pushed by that other Tory, Tony Blair?:D;)

It is no secret that the EU wish to seek a harmonized VAT rate across the EU member states for it will be easier to administrate and remove any barriers to competitiveness (ie, Dubliners (Ireland) going over the border to Northern Ireland as the VAT rates were lower (17.5% against 21%) and buying cheaper food, petrol and goods as a result to the detriment of Dublin businesses.

The EU has seen VAT increased across a number of states in the last 9 months, Ireland, Greece, Slovakia, Romania, Finland and Hungary - not all of which have conservative governments (ie, Greece, Ireland, etc). It is part of harmonizing taxes in the EU and just think of the poor Romanian or Latvian where people are paid peanuts but seeing prices rise, but is the price to pay to be a member and to access all that lovely EU subsidy.

This is not a political finger pointing exercise, it is more to do with how the UK is locked into the EU whether we like it or not.

There is also an EU policy on increasing tobbacco duties to be in line hence why new EU entrants like Romania, Latvia, Hungary and Poland which have very low tobacco duty are restricted in how much they/you can bring into the UK duty free, whereas other EU countries there are no restrictions.

chrismac1

There are two schools of thought on VAT.

1. Regressive - poorer income brackets get hit harder.
2. Progressive - Roman Abramovich and his ilk can do lots of clever things to avoid UK income and other taxes, Council tax and VAT are about the only things they pay their fair share of.

Looking behind item 1, there is in fact an implicit moral judgement here. Essentials such as food, childrens' clothing and utilities either have zero VAT or low VAT. The one standard rated item the poor are forced to pay VAT on is fuel. One of the key reasons VAT hits them so hard is that they tend to spend a higher % of their income on booze and fags which are not exactly essentials of life.

This VAT rise was coming no matter who won the Election, Labour's numbers just didn't add up. So any political points scoring is hypocrisy. We will be on a knife edge of reccession in April / May when the public sector cuts bite. If we get away with it we'll have paid down a decent chunk of debt and kept the economy - just - afloat. If things start to look dodgy there must be a plan B - not throwing money around as irresponsibly as the US has, but less severe cutting would be my vote.

PNPSUKNET

The way I look at it, last year we had a reduced vat to 15%, which was a 2.5% reduction. So now they are taking it back like they said they would. Our government give nothing for free. I wonder what will happen once national insurance goes up also.

Paulgonnabedebtfree

I notice that when VAT went down to 15%, fuel duty went up at the same time meaning that there was no difference in price.
When VAT went up to 20%, fuel duty also went up again rather than down to balance the price.
We are being taken for mugs.
One thing I dislike more than being short of money is being taken for a f***ing idiot.

zagfles

chrismac1 wrote: »

There are two schools of thought on VAT.

1. Regressive - poorer income brackets get hit harder.

That's the problem with the claim that VAT is regressive - it's only regressive if you measure it against peoples' income, and it makes no sense to measure a spending tax against income, you have to measure a spending tax against peoples' spending just as you measure an income tax against income.

If you measure it using spending it is clearly progressive, as this BBC article demonstrates:

http://www.bbc.co.uk/news/business-12111507

dasilva_2

Osbourne said '"Income tax and National Insurance [increases] would have a more damaging impact on poorer people in our society."

Isn't National Insurance going up also in April?

As for Vat not being on some of the essentials like food. It all has to get delivered and there is VAT on fuel, the supermarket has to be heated, maintained etc and commercial rent is also vatable.

I voted conservative but I don't think this rise is the answer. If VAT was reduced to stimulate the economy then conversely raising it will depress the economy. We should look at reducing foreign aid, bail out money to other countries and the EU contribution in general to balance our books.

Paulgonnabedebtfree

They could always save a bit more by halving Clegg's pay to 15 pieces of silver.

JasonLVC

dasilva wrote: »

As for Vat not being on some of the essentials like food. It all has to get delivered and there is VAT on fuel, the supermarket has to be heated, maintained etc and commercial rent is also vatable.

VAT is only a tax on the end consumer. Trade between two or more VAT registered businessess (such as Tesco and Eddie Stobart transport) is VAT neutral as Tesco will reclaim any VAT Stobart charges them, thus VAT doesn't impact on Tesco at all.

A non-VAT registered business buying from a VAT registerd business would incur additional costs as the non-registered business cannot reclaim VAT and thus those businesses would have to increase their prices (in effect, pass on the VAT increase), thus the end consumer is still the only one who pays the VAT.

CLAPTON

JasonLVC wrote: »

VAT is only a tax on the end consumer. Trade between two or more VAT registered businessess (such as Tesco and Eddie Stobart transport) is VAT neutral as Tesco will reclaim any VAT Stobart charges them, thus VAT doesn't impact on Tesco at all.

A non-VAT registered business buying from a VAT registerd business would incur additional costs as the non-registered business cannot reclaim VAT and thus those businesses would have to increase their prices (in effect, pass on the VAT increase), thus the end consumer is still the only one who pays the VAT.

technically true but in practice it depends upon whether or not the business can pass on the costs to the consumer;