DavecUK I do think VAT is insanely high at 20% of the product cost.
Do you mean in general, or on used stuff. i assume in general??
On that assumption …. maybe?
But it’s a very complicated subject indeed.
To what degree, and on who, should the tax burden fall? My premise is that the more we want the state to provide services, including some pretty much only the state can provide, they have to get the funds from somewhere. Which means they have to raise tax revenue somewhere, especially given a pretty lethargic economy with modest, at best, growth.
It’s nice to think we could just, as our current Chancellor likes to say, put the biggest burden on the broadest shoulders. i.e. make the rich pay. It’s been tried before, and the result was large-scale exodus of the rich to more tax-friendly locations. The problem is, those with the broadest shoulders also have the biggest, by FAR, ability to beggar off abroad … and in many cases, homes overseas already. One report I saw a week or so back suggested sufficiently large numbers of people are already doing that, and significant numbers have been since the start of the year (the writing of the election result having been on the wall for quite a while) that very hifgh-end properties are slumping in price due to increased supply and decreased demand.
For taxing the rich to actually work, you have to be able to make it impossible to avoid the tax, even by changing location.
We all want the best services we can get, and the current furore over winter fuel payments being withdrawn (a furore I entirely agree with, BTW, and can’t quite believe it’s a Labour government doing it), and the problems with everything from demand on NHS services to lack of prison places is all over the news.
So …. if VAT were to be cut to, what, 17.5%, 15%? What services do we cut spending on, or what other form of tax do we increase, even to keep services the same.
VAT has a couple of significant benefits as a tax vehicle. Firstly. lots of essentials (like lots of foodstuffs except, obviously, “luxuries”) are zero-rated. Secondly, a lot of the things that cost us dearly in VAT, like computers, fancy TVs, and yeah, expensive coffee machines, are at least discretionary. If someone doesn’t want to pay the tax, it’s easy to achieve - don’t buy fancy, expensive stuff.
I don’t like VAT at 20% either, but if the government don’t raise their £x billions in VAT, they’re gonna plonk that tax on something else that might be less discretionary. Maybe they raise income tax, or N.I. … despite pre-election promises. But someting will go up, that we might like a lot less.
Deciding what we should, and shouldn’t tax, and by how much is horrendously complicated, especially where the ability to not pay is either for the rich (by moving outside the tax jurisdiction), or by putting it on non-discretionary items and risking those least able to pay ending up doing so.
It’s a sad fact of life that the bulk of the tax burden is going to fall on the bulk of the population,. There simply aren’t enough “rich” people to be able to replace bulk taxation without marginal rates on the rich being so high as to be giving a huge incentive to leave to exactly the people most able to do so. Making the pips squeak might be a great idea, but an increase in a given tax actually has to result in increased tax revenue ffor it to be workable as a way to raise money for public services. And it ain’t easy doing it.
