Abolish VAT: Brexit dream or reality?
Should VAT become a sales tax now that the UK has left the EU? Neil Warren considers this suggestion, alongside the downsides.
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Many thanks for your kind words; much appreciated.
Curl your hair and raise your blood pressure, here!
https://www.cityam.com/uk-taxpayers-second-highest-contributor-vat-eu-bu...
It seems to me, the days of Government profligacy have now become turbocharged! No longer wasting millions; it is now Billions!
A. Track and Trace: £37 Billion!!! For a totally failed system which never ever worked. Nice for Capita and the rest, though...
B. https://www.nytimes.com/interactive/2020/12/17/world/europe/britain-covi...
Another £22 BILLION!!
Keep on going...
I agree that this is a fantastic summary. I was working for Bang and Olufsen at the time and our sales were subject to 33% Purchase Tax. With the looming change to VAT, our sales slowed as the public began to realise with the advent of 10% VAT that there was a big cost saving about to happen. Unfortunately the Danish Kroner was also moving adversely squeezing our margins. We increased our prices to coincide with the VAT introduction so there was no change in retail prices. This lead to a storm of protest and most of the accounts department were drafted into the sales team to cover the large volume of calls!
Thank you, Ray.
In the early 70s, I was at management school, full time and one of my majors was the EEC.
Britain was then in its "Run In Period".
I was very much against joining the EEC, beforehand and after my studies even more against the idiocy which the EU became. After passing my management exams, I returned to practice, but focused on international consultancy.
The idea that Purchase Tax only applied to "Luxury Goods" should be approached with great caution. That may have been the case at the outset but had been massively eroded as time went by. Essentially everything that was free of Purchase Tax was zero-rated when VAT came in. Almost everything that was subject to standard rate VAT had previously attracted Purchase Tax at one of several rates - hence it was an essentially correct statement to say that (in comparison to Purchase Tax) VAT was “One simple tax; one low rate.”
The McVitie's battle was about whether a Jaffa Cake was a chocolate biscuit which had been subject to Purchase Tax and attracted VAT or a cake which hadn't been subject to Purchase Tax and was zero-rated for VAT. During the case McVities development kitchens made some giant Jaffa Cakes which were very obviously a cake and essentially that was what settled the case. The dispute wasn't due to VAT per se and could have just as easily happened in the Purchase Tax era.
I think, realistically, there is no political will to abolish VAT. The best we can hope for is that, over time, our freedom from EU supervision will allow us to change the tax to suit us better and iron out some of the ridiculousness. That said, the introduction of DRC is a bad sign as it is going the wrong way in terms of simplicity so, again realistically, we’re all really whistling in the wind.
In terms of blue sky thinking and if we were to abolish VAT, though, I would prefer to look at the whole shooting match. Our current approach to taxation appears to be “let’s tax every taxable opportunity a little bit but not enough to make them squeal too loudly” along the line of Richelieu’s (was it him?) maxim.
Wouldn’t it be fairer to say either we’re going to tax income heavily (so, stuff like IT, CT, CGT) but spending lightly or, alternatively, the opposite and major on taxes like VAT, duties and IHT (if estate distribution is seen as a form of spending)? I would value that honesty but it would need a royal commission to do the spadework and I’m not holding my breath, just like we’re still waiting for the royal commission so badly needed on status generally and gig workers particularly.
................except John didnt notice that the VAT rate till 31 March should be 5% not 20%?
Interesting article, pure fantasy of course, it brings in the government to much money and its the tax that the governments are not scared to put up, unlike others.