Getting rid of VAT

[Denny Crane!]

Its been proposed that VAT is a regressive tax, the machinations that go towards collection are wasteful and expensive, the administration of this tax is costing businesses creating even more waste and thus less jobs.

Anecdotally Ive ran three microbusinesses and VAT is costly, expensive and time consuming. We also experienced extremely negative interactions with investigators where the presumption is always one of guilt with no appeal possible.

Point one, do you accept the idea it should be removed?

Point two, how?

The problem with removing it is that for all its inefficiencies, expense and problems it still manages to generate a massive amount of money and that isnt easy to fabricate out if thin air. Take the UK as an example Im positive the figure is in excess of 90 bn PA.

I agree with its removal but it would have to be phased in over 5 budgets (2 decades) with a 4% reduction per budget.

[Thorn777]

It was once traded for us in exchange for lowering high income tax drastically(under Thatcher it went up from 8% to 17,5%), part of the grand Friedman investor knows best strategy. So there you go, read between the lines...

[Larkin]

I'd disagree. VAT is an extremely important source of revenue for most governments. You're right that collection, especially in countries renowned for waste (like the UK) is inefficient. So that is where the effort should be made, reforming the system to ensure that collection is cheap and easy.

I think that 20% is a little too high. I think a 15% VAT rate is good. People buying two things at 15% VAT is better than buying one thing at 20%. With price increases everywhere, people are buying less. So the solution would be to freeze prices and lower VAT to assure the businesses that more of the money in the sale goes to them. Customer confidence would be restored by knowing that goods can't keep increasing in price, encouraging them to buy more, making the government more money as well as the businesses, which can be taxed.

I also think that lowering corporation tax was an awful decision. So few businesses pay the tax as is, there should be similar reforms to ensure it is collected. It should be progressive - 40% or 50% for businesses with the highest profits, and lowering as the profits decrease.

Sorry, I kind of ranted here. To answer concisely:
Point one - no.
Point two - it should, however, be lowered and reformed to ensure it is collected cheaply and efficiently.

[Denny Crane!]

Just to pick up on this phrase, "its an imortant source of revenue"

More important than another? Why? If it could be replaced with something else viable is there a reason you wouldnt? Im not picking just it is the crux of your post and yet just important by itself is recundant if it is A. Inherently unfair, hurts businesses and jobs and B. could be replacex. B sells it to me if there is another way then the import is negligible.

[Condottiere 40K]

Get rid of it; but first, find a less intrusive and more efficient way to fund all the government programmes we're all so fond of.

[Larkin]

Just to pick up on this phrase, "it's an important source of revenue"

More important than another? Why? If it could be replaced with something else viable is there a reason you wouldnt? I'm not picking just it is the crux of your post and yet just important by itself is redundant if it is A. Inherently unfair, hurts businesses and jobs and B. could be replaced. B sells it to me if there is another way then the import is negligible.

I don't think you could find a way to replace the billions raised through VAT that would be fair. I mean, what would you tax? Where would the money come from? There are certainly other ways to raise money that are perhaps more "fair" but in my eyes VAT is one of the fairest taxes, and raises far more money.

[Thorn777]

I don't think you could find a way to replace the billions raised through VAT that would be fair. I mean, what would you tax? Where would the money come from? There are certainly other ways to raise money that are perhaps more "fair" but in my eyes VAT is one of the fairest taxes, and raises far more money.

Germany alone has 10 trillion € of private held assets, which is about the equivalent of all 27 EU member states debt combined. That is just whats on paper. Its estimated far greater when taking into account all capital stashed away in trustfunds from Switzerland, to Jersey, to Aruba, to Delaware and back.

Note, Im not saying invade Germany, Im pointing out we all in the west doubled our wealth since the early 90's, went with a boom that caused all this wealth, but when it bust the state needs to jump in and its the pillars of society we sell just in order to not do awefully Stalinist things like Robin Hood taxes and assorted policies that reflect a learning process based on the facts. And the chosen path is not even working very well, nvm in a future needing human capital excess-supply more than ever, better yet the rich got even richer in the entire crisis process, which means more serving of interest by someone, either state or private person, so this austerity cycle we went with will continue further and further, which by no means can be an answer.

All while doing nothing about the structural problems that caused this.

So instead of regressive VAT tax, more progressive taxation is needed and very possible, and not just to replace VAT or decrease VAT but to tackle various structural problems.

[Larkin]

Oh, I totally agree that austerity isn't working, don't get me wrong on that. I just don't think scrapping VAT would help.

[Rolling Thunder]

Of course it would. Drop prices all around by 20% and you're going to drive up consumption. Now, where the money for that is going to come from, I don't know. I would suggest a policy of vigorous tax enforcement, loophole closure, bringing the 50p tax rate back up, a higher effective tax on capital gains, the complete abolition of child benefit, and the legalisation of a variety of currently illegal substances (and their effective taxation and regulation) to partially close the gap.

[Denny Crane!]

50p tax rate brought in very little income in comparison to the 45p tax rate. We'd be looking at increased income tax across the board, lowering of personal allowances would bring in a lot, taking allowances down to 4500 would bring in about 16 billion (raising it by a thousand cost 8 billion so lowering it by 3000 well it doesnt work out at 8 bn per thousand cumulatively but its still a large amount. Combine that with raising income tax across the board well you could probably get 30-40% of the way there.

Still leaves 50 odd billion. You arent going to get that through pot taxes.

This is why If it was to happen I suggest it be rebalanced very gradually over two decades, its a bit of a nightmare.

[Sarissofoi]

VAT is an extremely important source of revenue for most governments.

Exactly.
Goverments should have plenty of money. They should have little so they will county every penny and so if one penny go missing you can easly notice that.

Now goverments have plenty of money but they just waste it and even worse they waste it and make debts.

[Rolling Thunder]

50p tax rate brought in very little income in comparison to the 45p tax rate.

Due to utterly idle enforcement by New Labour and the sheer preponderance of tax loopholes, exemptions and outright avoidance permitted. Enforce it vigorously and it will bring in a bit more to close the gap.

Still leaves 50 odd billion. You arent going to get that through pot taxes.

This is why If it was to happen I suggest it be rebalanced very gradually over two decades, its a bit of a nightmare.

Yeah, we can look at only 10 billion through marjuanna...(presuming it's as widely-consumed as tabs, which is a fairly conservative assumption given how tabs are on the decline). Still, it'll plug the hole somewhat. Prostitution will also help, so will the legalization of other psychotropics (just by the amount of tourists coming to our shores to sample all these delights safely and legally). But I agree, it's unlikely we can just gut VAT overnight, so we'd have to go into a very serious austerity program first (unlike the Tories pretend-austerity), we'd most likely have to negotiate our way out of the Common Agricultural Policy by winning over the Northern European nations to the abandonment of said policy...

We could also cut MPs' salaries by 50%.

[Treize]

We are going to raise it from 19% to 21%.

Sucks, but atleast they are going to drop it to 6% for solar panels and 'art'.

[MathiasOfAthens]

Get rid of it; but first, find a less intrusive and more efficient way to fund all the government programmes we're all so fond of.

So reform it then?

[Rolling Thunder]

So reform it then?

No, rid of. Regressive taxes have no place in a civilized society.

[Denny Crane!]

Due to utterly idle enforcement by New Labour and the sheer preponderance of tax loopholes, exemptions and outright avoidance permitted. Enforce it vigorously and it will bring in a bit more to close the gap.

Just how many earners over £150k do you really think we have?

Yeah, we can look at only 10 billion through marjuanna...(presuming it's as widely-consumed as tabs, which is a fairly conservative assumption given how tabs are on the decline). Still, it'll plug the hole somewhat. Prostitution will also help, so will the legalization of other psychotropics (just by the amount of tourists coming to our shores to sample all these delights safely and legally). But I agree, it's unlikely we can just gut VAT overnight, so we'd have to go into a very serious austerity program first (unlike the Tories pretend-austerity), we'd most likely have to negotiate our way out of the Common Agricultural Policy by winning over the Northern European nations to the abandonment of said policy...

10bn from tabs really? And I wouldn't say there is as much marijuanna consumption as cigarrette consumption. Its impossible really, you can only get so stoned before you can't do anything. Ciggies are consumed everywhere at every time.

But yes I am sure we could rebalance it 10bn at a time. Simply ending the war on drugs would save billions never mind the duty etc.

[/quote]We could also cut MPs' salaries by 50%.[/QUOTE]

Really don't think MPs should be on less than 60k a year and 600x30k ain't that much.

[Rolling Thunder]

Just how many earners over £150k do you really think we have?

Not many, but a fairly significant number. Enough to be worth taxing properly.

10bn from tabs really?

Straight up. I'm having a root-around for the source now.

And I wouldn't say there is as much marijuanna consumption as cigarrette consumption. Its impossible really, you can only get so stoned before you can't do anything. Ciggies are consumed everywhere at every time.

And the excise on cigarettes reflects that consumption. Excise on marjuanna would most likely have to be higher to account for it's less-frequent usuage, but given the proclivity of large sections of the population to experiment with it (and the amount of tourists that will come here to experiment with it legally and safely, especially with Amsterdam clamping down on it's sales of marjuanna) then we can reasonably expect a significant boom to not only to tourist numbers (and thus other tax sources).

But yes I am sure we could rebalance it 10bn at a time. Simply ending the war on drugs would save billions never mind the duty etc.

Absolutely.

Really don't think MPs should be on less than 60k a year and 600x30k ain't that much.

I'm pretty sure MPs are on 80K a year, which is a ton when you consider they also get travelling expenses. However, you're right, 600x80,000 is peanuts in the grand scheme of things.

[Condottiere 40K]

Sin taxes are an interesting alternative, but would they be able to take up the slack?

I personally feel that VAT isn't just a revenue stream, it also keeps tabs on what's going on in the market for government statisticians.

[Vítor Gaspar]

I think they're needed. They're a needed pain.

Now I believe there should be better ways of making sure business pay them, because it's the easiest tax to evade. For example, I've thought for years that they should implement this system that, for example, if a good has a 21% VAT tax, if the consumer buys it and asks for a receipt and delivers it to the State at the end of the fiscal year the said consumer should get some 3 or % of the tax back.

This would force businesses to pay taxes and not evade them. Because, the way I see things, way too many shady shops sell goods for the VAT price and I feel like they're not paying it to the state. So the tax burden lies on the consumer. And the said consumer will consume less because of that, while the State doesn't make any profit from it. Everyone loses in the long term.

[Rolling Thunder]

That's the nature of VAT. If everyone pays, then naturally the largest cost is passed onto the individuals at an rate inversely proportionate to their bargaining power - the same with any of cost of living rise. Theres' no "way to make businesses pay" the tax, because the tax is directly implemented at the shop floor - thus artificially distorting the price mechanism. It's a tax that hits low earners the worst, and thus has no place in civilized society.