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VAT AND THE NEW PROGRESSIVES ?
The Institute for Fiscal Studies, has just posted some initial reactions to the Coalition agreement published today. Perhaps the most intriguing bit is that it thinks the agreement may pave the way for some “significant” tax rises at the Budget – most likely on VAT.
Also according to a survey of leading economists VAT will rise under the new coalition Government, .
The BBC said 24 out of 29 economists used by the Treasury expect the rate to rise in the new Parliament. Most of those questioned predicted the tax would increase from its current 17.5% to 20% - it could further rise to 25% - as elsewhere in Europe !
Cameron yesterday described his Coalition as “Progressive”
VAT is Not Progressive - its Regressive Taxation which hits Pensioners and Low Earners much harder - very often unfairly hard !
If indeed Taxes need to be raised, then shouldn’t the new “Progressives” be making those tax rises Progressive Tax Rises - like, for example , raise Income Tax by up to 6p in the pound which the National Institute of Economic and Social Research (NIESR) recently suggested ?
Surely Progressive Taxation - as opposed to unfairer Regressive Taxation - by Camerons/Clegg Progressive Coalition should be the budgetary order of the day ?
Also according to a survey of leading economists VAT will rise under the new coalition Government, .
The BBC said 24 out of 29 economists used by the Treasury expect the rate to rise in the new Parliament. Most of those questioned predicted the tax would increase from its current 17.5% to 20% - it could further rise to 25% - as elsewhere in Europe !
Cameron yesterday described his Coalition as “Progressive”
VAT is Not Progressive - its Regressive Taxation which hits Pensioners and Low Earners much harder - very often unfairly hard !
If indeed Taxes need to be raised, then shouldn’t the new “Progressives” be making those tax rises Progressive Tax Rises - like, for example , raise Income Tax by up to 6p in the pound which the National Institute of Economic and Social Research (NIESR) recently suggested ?
Surely Progressive Taxation - as opposed to unfairer Regressive Taxation - by Camerons/Clegg Progressive Coalition should be the budgetary order of the day ?
Answers
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Instead of dreaming up ways of raising more cash I think a much more useful debate could be held among our new joint leaders on the subject of spending far less.
12:03 Thu 13th May 2010
Hmm - not quite as black and white as that is it?
That's the case on necessities, but not on luxury items - the more you spend they more you pay.
It depends on whether you want to discourage spending or not.
If it happens (and I expect it will ) I shall be very interested to watch the reacions of the press who described rumours of a 2.5% rise as
"Labour's tax bombshell"
despite everybody saying that the 2.5% drop was pointless.
It will be interesting to see how long the Honeymoon lasts
That's the case on necessities, but not on luxury items - the more you spend they more you pay.
It depends on whether you want to discourage spending or not.
If it happens (and I expect it will ) I shall be very interested to watch the reacions of the press who described rumours of a 2.5% rise as
"Labour's tax bombshell"
despite everybody saying that the 2.5% drop was pointless.
It will be interesting to see how long the Honeymoon lasts
There is an argument for removing direct taxation altogether but no politician would dare. Obviously we'd have to rasie all sorts of duty/vat etc but we'd save Billions in tax collection etc. Then everyone would get all their wages to spend as they see fit. I know this is heresy but can we occasionally think the unthinkable?
perhaps further levels of vat . higher on genuine luxuries including jewellery , electronic gaming, confectionery, entertainment etc Much of this is imported to the uk so may fall foul of trade agreements though.
prefer the idea of direct taxation on what people actually buy but I feel all the real essentials should be vat free with those in need and of pensionable age being able to get exemption for utilities as well.
prefer the idea of direct taxation on what people actually buy but I feel all the real essentials should be vat free with those in need and of pensionable age being able to get exemption for utilities as well.
Instead of dreaming up ways of raising more cash I think a much more useful debate could be held among our new joint leaders on the subject of spending far less.
Public spending now accounts for about 50% of the GDP. This is ludicrous. One in every two pounds spent in the country is spent by the government. There is huge waste in almost everything the government has anything to do with:
- Armies of scribes are employed by HMRC to take money from people by way of income tax only to give it back (often with a premium) to the same people by way of tax credits.
- Huge numbers of workers are employed to calculate VAT accounts for businesses who simply pay tax on their purchases only to claim it back again. VAT is the most inefficient form of indirect taxation imaginable. Only the end users pay any significant amounts of it without claiming it back so a simple retail purchase tax would raise just as much revenue with virtually no administration costs. But, of course VAT is an EU edict so cannot be abandoned.
- Enormous consultancy costs are paid to companies doing virtually valueless work for almost every government department.
I haven’t even begun to consider why we provide Foreign Aid to a nation with a well developed space programme, or why we should pay to prop up the Euro (we would not consider propping up the Dollar or the Yen). The list is endless and the scope for and benefits of potential savings far exceed any extra revenue that might be raised by tinkering at the edges of the tax system.
Public spending now accounts for about 50% of the GDP. This is ludicrous. One in every two pounds spent in the country is spent by the government. There is huge waste in almost everything the government has anything to do with:
- Armies of scribes are employed by HMRC to take money from people by way of income tax only to give it back (often with a premium) to the same people by way of tax credits.
- Huge numbers of workers are employed to calculate VAT accounts for businesses who simply pay tax on their purchases only to claim it back again. VAT is the most inefficient form of indirect taxation imaginable. Only the end users pay any significant amounts of it without claiming it back so a simple retail purchase tax would raise just as much revenue with virtually no administration costs. But, of course VAT is an EU edict so cannot be abandoned.
- Enormous consultancy costs are paid to companies doing virtually valueless work for almost every government department.
I haven’t even begun to consider why we provide Foreign Aid to a nation with a well developed space programme, or why we should pay to prop up the Euro (we would not consider propping up the Dollar or the Yen). The list is endless and the scope for and benefits of potential savings far exceed any extra revenue that might be raised by tinkering at the edges of the tax system.
-- answer removed --
I think the coalition is looking at cutting public waste, a tory manifesto pledge. I don't think 20% is that bad, I was wondering about a 22% rise as you point out Olddutch is still below European levels. I don't think it will reach 25%.
As others say VAT increase hits more I think the bigger spenders as in purchasers of luxury items than basic thus 'progressive' increase in respect of high end consumption. Really low income families tend to get food vouchers I think around £12 a week. Some genuinly spent, some on cigarettes. Plus shops like Primark aren't exactly leaving poorer people worse off, fashion at good value, if not encouraging a wasteful society? Hopefully the VAT tax will be short-term.
As others say VAT increase hits more I think the bigger spenders as in purchasers of luxury items than basic thus 'progressive' increase in respect of high end consumption. Really low income families tend to get food vouchers I think around £12 a week. Some genuinly spent, some on cigarettes. Plus shops like Primark aren't exactly leaving poorer people worse off, fashion at good value, if not encouraging a wasteful society? Hopefully the VAT tax will be short-term.
some good points New Judge
£26bn Wasted on Computer Blunders. In January it was reported that The Independent had investigated Labour’s 10 most well-known IT mistakes and found that these mistakes cost taxpayers over £26bn in wasted funds. The biggest waste was a £12.7bn plan for the NHS to start using new electronic records. Fewer than 200 out
of 9,000 health organizations are using the technology despite the fact that the money was spent on it. Delayed, canceled and faulty computer plans throughout the government continue to waste your money to this day.
£26bn Wasted on Computer Blunders. In January it was reported that The Independent had investigated Labour’s 10 most well-known IT mistakes and found that these mistakes cost taxpayers over £26bn in wasted funds. The biggest waste was a £12.7bn plan for the NHS to start using new electronic records. Fewer than 200 out
of 9,000 health organizations are using the technology despite the fact that the money was spent on it. Delayed, canceled and faulty computer plans throughout the government continue to waste your money to this day.
Thing to remember old dutch is that these blunders may have happened under a Labour government but they are almost certainly the fault of civil servants.
The same Civil servants who will be workinf for this new Government!
All organisations Public and Private mess up and produce huge amounts of waste - look at the BP oil spill - imagine if that were a Government operation!
The idea that somehow the Tory party is more compentant at such things is just a right wing fantasy
The same Civil servants who will be workinf for this new Government!
All organisations Public and Private mess up and produce huge amounts of waste - look at the BP oil spill - imagine if that were a Government operation!
The idea that somehow the Tory party is more compentant at such things is just a right wing fantasy
Yes Jake
Bit like the Expenses Scandal showed - All Parties are capable of Waste - lets hope for all our sakes that all waste is now eradicated
£1bn Wasted on Perk Credit Cards. Last year UK government officials managed to spend £1bn on their government procurement credit cards. Sure, some of this spending might have been for things that were actually needed. However it’s been shown that a lot of that spending was on frivolous stuff like super-expensive lunches. The average person knows that spending on credit cards should always be a last resort. And the problem is particularly bad since there are so many people in the public sector who expect to be laid off because the government supposedly can’t afford to keep them on
Bit like the Expenses Scandal showed - All Parties are capable of Waste - lets hope for all our sakes that all waste is now eradicated
£1bn Wasted on Perk Credit Cards. Last year UK government officials managed to spend £1bn on their government procurement credit cards. Sure, some of this spending might have been for things that were actually needed. However it’s been shown that a lot of that spending was on frivolous stuff like super-expensive lunches. The average person knows that spending on credit cards should always be a last resort. And the problem is particularly bad since there are so many people in the public sector who expect to be laid off because the government supposedly can’t afford to keep them on
And how many mistakes are forgiveable? The independent listed 10 IT mistakes. I agree much of it can be down to civil servants such as the negligence of the misplaced cd's with personal public information on them but Jake you cite an example of the BP Oilspill - if that was Government owned, it would cost the government their governance, they would be hammered down on bigtime by everyone.
That disaster is evidence of failures by inexperienced personnel brought in to save costs and therefore they failed to follow set plans and accepted procedures. As well as companies by-passing regulations. The BP oil disaster will change how the industry operates and new laws will probably be brought in. Advisors and consultancy firms to the government investigate the practacilities of implementation, procedure etc one, two, three mistakes are forgiveable but to throw public money at a venture without proper regulation is absurb and completely wasteful. 200 out of 9,000??
That disaster is evidence of failures by inexperienced personnel brought in to save costs and therefore they failed to follow set plans and accepted procedures. As well as companies by-passing regulations. The BP oil disaster will change how the industry operates and new laws will probably be brought in. Advisors and consultancy firms to the government investigate the practacilities of implementation, procedure etc one, two, three mistakes are forgiveable but to throw public money at a venture without proper regulation is absurb and completely wasteful. 200 out of 9,000??
And in any case my point made no mention of costly mistakes (although it could easily have done).
Enormous waste exists in everyday government processes and procedures. There is duplication and unnecessary procedures which add little or nothing to the efficient functioning of the state’s services. In the examples I mentioned (VAT and income tax/tax credits) the very processes are deficient in their philosophy. No sane organisation would develop a system which needs armies of scribes to take money from people and then pay it back to the very same people a little later. No business would countenance a costly process like VAT where only end users pay a charge but everybody in their supply chain and manufacturing process has to pay the same charge only to claim it back. It’s utter madness and these are but two examples of an almost endless list.
If we’re going to “think the unthinkable” (and I don’t think abolishing tax credits or streamlining VAT should be unthinkable) these are the “big ticket” items that can really make a difference.
Enormous waste exists in everyday government processes and procedures. There is duplication and unnecessary procedures which add little or nothing to the efficient functioning of the state’s services. In the examples I mentioned (VAT and income tax/tax credits) the very processes are deficient in their philosophy. No sane organisation would develop a system which needs armies of scribes to take money from people and then pay it back to the very same people a little later. No business would countenance a costly process like VAT where only end users pay a charge but everybody in their supply chain and manufacturing process has to pay the same charge only to claim it back. It’s utter madness and these are but two examples of an almost endless list.
If we’re going to “think the unthinkable” (and I don’t think abolishing tax credits or streamlining VAT should be unthinkable) these are the “big ticket” items that can really make a difference.
Seadragon
Re your first post you make a reasonable argument, but I feel VAT would be better left alone altogether - or at the very least, have all basic living essentials ring fenced for No Increase - hope Coalition instead focuses largely on the elimination of wasteful government spending.
The Coalition agreement says that “the main burden of deficit reduction should be borne by reduced spending rather than increased taxes”. But it did not specifically endorse either the 4:1 split proposed in the Conservative manifesto or the 2½:1 split implied by the Liberal Democrat manifesto. Hope the agreement helps minimise any potential VAT increases under consideration.Thanks for your contributions
Re your first post you make a reasonable argument, but I feel VAT would be better left alone altogether - or at the very least, have all basic living essentials ring fenced for No Increase - hope Coalition instead focuses largely on the elimination of wasteful government spending.
The Coalition agreement says that “the main burden of deficit reduction should be borne by reduced spending rather than increased taxes”. But it did not specifically endorse either the 4:1 split proposed in the Conservative manifesto or the 2½:1 split implied by the Liberal Democrat manifesto. Hope the agreement helps minimise any potential VAT increases under consideration.Thanks for your contributions
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