[Closed] Is VAT still a regressive tax?

In particular I'm considering it not against income tax, but against corporation tax.

Well not really - the point of VAT is only the end user customer pays it - corporations or other vat registered traders [i]collect[/i] the vat from the end user - they don't pay it as such.

I'm vat registered - the VAT I pay to HMRC is the difference between the vat I pay to my suppliers and the vat I charge my customers - I effectively reclaim the vat I pay on supplier from the vat I charge. I don't 'pay' any VAT at all - I collect it from the customer and hand it to HMRC

Thoughts?

You are John Redwood and I claim my £5 VAT refund finders fee

VAT tends to be a free loan to companies too as they pay it a quarter in arrears so collect from their customers and then it's in their cash flow for up to 3 months before they have to hand it over to the government.

Well it would be a free loan except that you're doing the governments work for them - your time collecting, calculating declaring and paying returns doesn't get paid for by anyone. At least 20% makes the sums nice and easy. 17.5% was a pain in the hoop.

By that measure self assessment / corporation tax is a 22 month free loan 🙂

[i]your time collecting, calculating declaring and paying returns doesn't get paid for by anyone. [/i]

surely it's built into your overheads as a business, like doing the payroll etc?

Its a good way of putting up the base level of tax, while pretending thats not what it is you've actually done. Hits the poorest in society disproportionately hardest
Its George Osbournes wet dream

surely it's built into your overheads as a business, like doing the payroll etc?

So its an overhead then - not free

Yes its regressive. The poor payer a higher proportion of their income as VAT than the rich. That the definition of a regressive tax.

Its not as bad a Council Tax but its still regressive

I'll rephrase it;

VAT is a 20% increase in your cash flow for filling in some forms every few months and keeping track of invoices into and out of the business (which you'd do anyway).

What binners says and tax rates stay the same as % they just change form direct to indirect. I would more towards Direct personally

Whilst most agree with targeting tax avoiding businesses VAT is paid by their customers not them

If you want to hurt them its easy dont buy from them as the only thing they GAS about money., if they stop getting it they will change to get it or die out.

We get what we put up with

The poor payer a higher proportion of their income as VAT than the rich. That the definition of a regressive tax

Is that actually true though? Given that "the poor" (for want of a better description) will spend a larger proportion of their income on things like accommodation (which doesn't attract and VAT), domestic fuel (which is charged at 5%) and food (most of which is exempt) than "the rich" (again for the lack of a better description) I wouldn't necessarily expect that to be the case. That being said the main reason for confusion over the matter is the bewildering comlexity of what is and isn't subject to VAT!

The argument is better worded as the poor ending up paying a higher % of their income in tax as a result of VAT than as a result of say income tax. For example gas and electricity is a greater % of their income and they dont save or invest so they do less VAT free stuff.

The poorest 10% of households pay eight percentage points more of their income in all taxes than the richest – 43% compared to 35%, according to a report from the Equality Trust.

(which you'd do anyway).

Passing the VAT threshold gives me 5 accounting dates in the year rather than just one. I'm not complaining at all* as my work is 'mid stream' in VAT terms - I don't sell time/things to the public and if wasn't VAT registered me breaking the chain would arse everything up for people down stream from me.

The work you need to do varies greatly depending on what kinds of transactions you make as a business - I probably only issue a couple of dozen invoices a year at most but can have £50k - £100k worth of receipts to pick through (cursing at no two suppliers managing to put the date or the amount in the same place) Its five to six full days work a year. No big deal but thats more unpaid time than I took as holidays (and I'm including weekends in that) last year - its significant enough. But if my work model was different I could be incurring much heavier admin time/costs - if I was making lots of small sales rather than undertaking a small number of contracts. The thing with the VAT threshold for businesses its turnover rather than profit dependant and businesses like mine with a high turnover figure but also a high overhead figure and therefore quite modest incomes and in those situations the time/cost of the admin is quite significant

* well I complain quite vocally on new years eve as I seem to be the only person in the world who has to do a return then

Totally accept the income tax versus VAT argument.

However corporation tax at the moment looks broken. Small (poor?) companies pay handsomely will multinationals pay very little in relative terms. And it's not the multinationals fault it's the tax regime's.

So the question arises, what do you want to do instead of corporation tax? "Nothing" is a legitimate answer - possibly boy my preferred one.

PS as to who pays VAT, as an end customer I don't care if the price is 100 and I pay 20 to the government or the price is 120 and the shop pays 20 to the government. I accept that from the point of view of a company buying on one hand and selling on the other their may be a difference but that could be sorted perhaps.

If you want to cut VAT, Tax etc ... then you need to see what they are feeding first ...

Very simple just cut the white collar ZM bureaucrats number by 60% especially those [b]administrative pen pushers [/b] (I am talking about this lot and not those cleaning the street etc) then keep a cap on their salaries. These are the ZM bureaucrats that create problems for the masses in order to justify their own existence.

If you can reduce those ZM then you don't have to pay towards their feeding hence VAT can be reduced.

Who take up the slacks as I hear? The market or technology will ...

🙂

Is that actually true though? Given that "the poor" (for want of a better description) will spend a larger proportion of their income on things like accommodation (which doesn't attract and VAT), domestic fuel (which is charged at 5%) and food (most of which is exempt) than "the rich"

The rich don't live in cheap houses though - people will tend to live in the best house in the best neighbourhood they can so housing will still be a significant cost to the well-off. (which is why you'll often get people on here stating that earning £50k doesn't make them well off.

The regressive element is the poor, by necessity spend all the money they have and get taxed on that expenditure. The rich at least have the option not to spend everything they earn - they can save it, invest, put it into a pension and so on. So the poor effectively get taxed twice on every penny but the rich have on option to only get taxed once on at least some of what they earn.

Chewkw - I think everyone is trying to spread tax more fairly. And quite possibly increase it slightly overall.

The question was not about reducing tax it was about whether VAT is regressive. The unwritten question in my mind is could a non-regressive VAT be dreamt up that would sort the corporation tax issue - and that's a little harder.

I accept that from the point of view of a company buying on one hand and selling on the other their may be a difference but that could be sorted perhaps.

If it was any other way it would be VAT.

If you take your bike as an example from the bauxite mines and oil rigs to the bike shop - how many times have the atoms its made of changed hands and had value added in that transition- from the mine to the refinery to the tube manufacturer to the frame manufacturer to the bike assembler to the distributer to the shop - with every component following similar and sometimes longer lines. If VAT didn't work they way it did the customer would be paying vat on top of vat on top of vat for each of those value-adding transitions from dirt and greasy slop to a bike covered in dirt and greasy slop

it's not the multinationals fault it's the tax regime's.

I am not sure how you can blame the system for them doing this...they dont have to do this they choose to.

How do we change this stop buying from them nothing else matters to them.

One could tax them on any sale to a UK address I assume.

as to who pays VAT,

Junkyard - they have a legal obligation to look after their shareholders' interests. Arguably that means making as much money as they can while not doing anything illegal or too immoral.

tax them on any sale to a UK address

That was the kind of thing a (revised?) VAT might do?

one could argue that paying fair taxes in countries they operate in *is* in their shareholders interest?

I would certainly say it is fairly regressive.

1. It is as flat rate and not income related. (not saying we should have a income related sales tax that would be crazy.)

2. People with businesses of a large enough turnover may be able to dodge VAT by passing certain items off as business expenses.

they have a legal obligation to look after their shareholders' interests

Actualy the obligation is not too much to do with the shareholders - a company has an obligation to try and succeed. You can succeed as a business without managing to distribute any profit quite legally but a company's directors would face prosecution if they made a business deliberately fail.

So we're agreed.

1. The current VAT is still regressive
2. Corporation tax is broken
3. We don't have the answers (not sure about this one)

Ok. Now about inheritance tax... (ducks)

Hardly GOs wet dream. VAT is a European invention and was introduced in the UK as precondition of entry into the old EEC. Having said that VAT in Europe has proved flawed in practice. Quelle surprise.

The main advantages of VAT are that it is an effective way to raise revenue not least because it is relatively hard to evade. That's one reason why all governments like it!

But re the regressive angle, it should be noted that VAT is a [b]tax on expenditure not on income[/b] (well actually it's a tax on the value added at each stage in the production process but that is starting to complicate issues.)

Latest stats suggest that poorest pay 20% of their expenditure in indirect taxes whereas the richest pay 17% with the gap between the two narrowing recently (although one gov table has both at 20%). Unsurprisingly, the amount of VAT payed is skewed the other way, with the richest paying 2.5x the poorest due the former's greater levels of expenditure.

Even though it is not a tax on income, in terms of a % of income VAT remains clearly regressive. The richest pay 14% of their income while the poorest pay 31% of their income.

Edit for X post: inheritance tax is immoral. On that line at least george will pander to the grey vote by freeing access to pensions.

3. We don't have the answers (not sure about this one)

A simple answer is make corporation tax work.

Those figures about the poorest paying a large proportion of tax than anyone else never make sense to me.

Take the case of someone earning the minimum wage but full time for 52 weeks per year. That gives a salary of £13936 which will have a Tax and NI liability of £1372. Assuming that all the remaining money is spent rather than saved means that the total VAT paid will be £2513 (assuming all of it is at 20%). This gives a total tax libility of £3885 or 28%.

The only way of making it up to 43% would be to have a council tax liability of £2100 which is frankly huge and there is no way that anyone on such an income could afford to live somewhere with a bill that high.

I am corrected.
However on checking apparently "success" of the company will usually mean (you are allowed to redefine it you wish) the "long-term increase in value".
Minimising tax appears to be in line with that.

they have a legal obligation to look after their shareholders' interests. [b]Arguably[/b] that means making as much money as they can while not doing anything illegal or too immoral.

Either way its still not the tax regimes fault they try to avoid tax with complicated structures.

maccruiskeen - Member

A simple answer is make corporation tax work.

Fair enough. Any idea how to do it?

Just to be clear, I'm not picking a fight, it just seems clearly broken with no clear fix.

Hardly GOs wet dream. VAT is a European invention and was introduced in the UK as precondition of entry into the old EEC.

How come he bunged it up by 2.5% the millisecond he became chancellor then? It was literally the first thing he did? Those bloody tories eh? Always cutting taxes! Oh.... wait.... hang on minute.......

They don't pay a larger proposition of tax. The pay broadly the same amount of indirect tax on expenditure but this represents a much higher % of income. They pay less direct tax.

Who pays the tax? Companies do not pay tax - it comes out of the pocket of one or a combination is customers (higher prices), staff (lower wages) or shareholders (lower dividends). So if easing taxes leads to increased prices and/or lower wages then that might not be such a good result for the poorest!

Binners - several reasons not least the one I gave originally. Plus consumption was more resilient that incomes at the time and he needed to raise revenues?

The government actively encourage tax avoidance by businesses in certain areas e.g. R&D tax credits brought in by Gordon Brown.

Junkyard - some companies are more aggressive, some less. Agreed. But governments don't get to whinge that companies should pay more tax - that's an abdication of the government's role. What the government gets to do is change the tax laws until the companies are obliged to pay some tax.

I tend to think of a company as an amoral (not immoral) mechanism for making money.

People have values - companies don't.

And talking of corporate cultures is people hiding from the things they themselves did.

Eg HSBC didn't do illegal / immoral things in Switzerland. People did. And those people's bosses didn't bother to reign them in (or even check to see if they needed reigned in).

People are responsible.

I'm going ranty and off topic now. Sorry

😉

Thank you Binners. Needed that.

it just seems clearly broken with no clear fix.

what makes it possible for corporations to avoid (rather than evade) tax, in a way mere mortals can't, is layers upon layers of breaks and incentives that have accrued over decades.

At the mega-corporation level you can entwine yourself in these so much that you end up being the only people who can say exactly what your tax liability should be - its so complex the HMRC couldn't hope to challenge it as they've not the resources to do so - If Vodafone says we owe 'X' HMRC basically has to believe them.

However the bulk of the tax gap from businesses isn't the big household names is the little people (like me probably) - its lots of little tax avoidances

like this

[img] [/img]

^thats tax avoidance^ - count how many you see each day. Its designed so specifically to avoid tax you can actually seem the legislation drawn on the bodywork - just behind the rear passenger door - that gap line between the door and the wheel arch avoids tax.

Its an incentive or concession for one purpose thats been seized upon and exploited for all its worth.

A solution would maybe simple corporate taxation and incentives realised as grants rather than rebates. If a government wants to encourage businesses into a location, or aid a certain industry or encourage us to drive a particular car then do it buy grants rather than tax-breaks. Then for your business to benefit from an L200 you actually need to be the farmer that the tax legislation was aimed at, not a dog groomer who want to take his kids to school in a vehicle he's put through his books as a commercial vehicle.

Corporate tax would need to be aligned with import duties to avoid some on the financial engineering and import duties would need to extend to data transactions. I think.

Corporation tax is not broken completely, it's more designed for the past not the current or the future. Without tax harmonisation there will always be loopholes for companies to exploit and countries to use to encourage investment. Plus ca change....

I dont see why a company should pay CT on its profits at all. It should only be paid if the 'profit' leaves the company. There I've said it.

wwaswas - Member
I'll rephrase it;

VAT is a 20% increase in your cash flow for filling in some forms every few months and keeping track of invoices into and out of the business (which you'd do anyway)

1. It is as flat rate and not income related. ([b]not saying we should have a income related sales tax that would be crazy.[/b])

Not sure you can call VAT a progressive or regressive Tax. The VAT you pay is related your expenditure NOT to the income you receive. So treating it as a percentage of your income is irrelevant.

1. It is as flat rate and not income related. (not saying we should have a income related sales tax that would be crazy.)

I dunno. 25% VAT on bikes and TVs over 2k, 30% VAT on cars over 20k, 50% VAT on yachts ? Bit like the old stamp duty on houses.

£5 wine 10% VAT, £50 wine 50% VAT?

That's a fascinating and disturbing article Junkyard. I dug up the original paper from the Equality Trust.

(for some reason the URL link doesn't work for a pdf, so cut and paste the link if you're interested)

People, me included, tend to think of tax as income tax, but it shows that especially for the poor it is a very minor tax.

Looking at that report there is some dubious inclusions for example the duty being paid on Alcohol and Tobacco (criticisms of Tobacco being regressive, well duh the whole point is to discourge smoking) are entirely discretionary. You don't have to smoke and you don't have to drink. I'm also amazed that anyone in the lowest 10% can afford to run a car, which I assume is what the Hydrocarbon oils iare. Also what on earth are "commercial and industrial rates".

Also the Pie chart on page 16 has 12 "slices" but only 11 items listed in the legend which frankly is just annoying.

[edit] The report also states that "...the bottom 10% pay roughly 23% of their gross income in indirect taxes on consumption" which given that income tax is 4.61 and NI is 1.64, council tax is 5.59 this gives a total of 35% which is some way short of the 43% headline figure.

To compound the confusion even further on page 25 the report states that "...the lowest decile are net beneficiaries of the tax and benefit system..." which contradicts everything that the report seems to be saying. If a group is receving more money back from the government that they are contributing (and I'm not saying that that is a bad thing) then it is disengenuous to state that that group is paying more as a percentage of income to the govenernment that others.

That Equality Trust report is so loaded it isn't even funny. They talk about the poor paying more in tax but they report it as a % of income, it's not like the poor actually pay more in real terms.

When you think about it it's obvious as they typically drink and smoke more and have poor diets (i.e. takeaways have VAT). Plus I expect they spend all of what they earn month to month, and nothing is saved and going into a pension or ISA for example.

They talk about the poor paying more in tax but in reality it's only a % of income, it's not like the poor actually pay more in real terms.

So this would only be a bad thing if the poor were actually paying more tax [i]per head[/i] than the rich? But as its [i]only [/i]a proportion of their income then its fine

When you think about it

They talk about the poor paying more in tax but they report it as a % of income, it's not like the poor actually pay more in real terms.

When you think about it it's obvious as they typically drink and smoke more and have poor diets (i.e. takeaways have VAT).

So this would only be a bad thing if the poor were actually paying more tax per head than the rich? But as its only a proportion of their income then its fine

If that were unequivically true then it might be considered a problem, but that report certainly doesn't back that statement up.

VAT has a number of significant positive features, first it's hard to avoid as its charged at the point of purchase, second it's paid by everyone including tourists / foreigners (note many countries have a specific tourists / hotel tax as well)

I think VAT is less regressive than people make out, we have many exemptions here eg food, children's clothes, reduced rate for gas/electric (which they dint have in the rest of the EU btw). VAT is not charged on rent. so in my view those on low incomes pay relatively little VAT on their essentials.

Yes its regressive. The poor payer a higher proportion of their income as VAT than the rich. That the definition of a regressive tax.

IMO the left bangs out the regressive argument as in their view more tax should be paid by the "rich" / someone else. until the crises we had one of the lowest VaT rates in Europe at 15% vs say the French at 19.6 (and they don't have the exemptions we do)

EDiT agree with thm that corporation tax was designed for the past and has not kept up at all with the present / future, it has also been undermined by the EU and blatant abuses encouraged by Lusembourg and Ireland.

Not only loaded but fails to take into account all parts of the taxation a system. Unsurprisingly there though, but guess they had a "story" to tell.

[quote=jambalaya ]VAT is not charged on rent. so in my view those on low incomes pay relatively little VAT on their essentials.
...
I've done my own calculations on this and I don't see how someone on, say, £20k pa pays more VAT as a proportion of income than someone on £50k this is due to all the exemptions on essentials and the higher earner will buy more non-essential items.

Except that as mentioned above, high earners tend to spend quite a lot of their money on accommodation - and like rent, mortgage payments don't attract VAT. I'm not convinced that somebody on 50k buys 2.5 times as many non essential items (which includes amongst other things choccy biccys, ice cream, crisps, take-aways, bicycles).

I think VAT is less regressive than people make out

I've done my own calculations on this and I don't see how someone on, say, £20k pa pays more VAT as a proportion of income than someone on £50k

Your current view is somewhat unclear but I am sure you are still 100% correct 😉

IMO the left bangs out the regressive argument as in their view more tax should be paid by the "rich" / someone else

The richest 100 people in the UK have £`100 billion pounds more than the bottom 30% [over 50% more]. You really think they should not pay more than the poor?

I don't think we should qualify VAT as regressive as the correlation of VAT to income doesn't really stack up. VAT relates to expenditure not income. When you look at expenditure, I would imagine that the poor pay less in VAT than the rich relative to the amount spent, working on the assumption that a higher proportion of expenditure is on zero rated items, making VAT a progressive tax not regressive... that said, by definition VAT is regressive. I just disagree with the way regression/progression is defined.

[quote=benpinnick ]I would imagine that the poor pay less in VAT than the rich relative to the amount spent, working on the assumption that a higher proportion of expenditure is on zero rated items

Depends how big rich bloke's mortgage is (and whether you count housing benefit as expenditure) - I certainly don't think it's a given.

working on the assumption that a higher proportion of expenditure is on zero rated items

as aracer states I dont think it is a given either

pension , savings, investments

Based on these numbers from the ONS -

%age of VAT in relation to expenditure is higher for the richest households rather than the poorest as I suspected it would be (8% vs 6.8%). The 5% hike in VAT over the period has narrowed that gap a lot though as VAT spend has grown much faster for the poorest compared to the richest.

you don't actually spend anything.

Where do I sign up for these " pensions, saving and investments that will generate me an income without me paying a penny?

and from your link

Finally, the data shows the poorest fifth of households in the
UK pay more in VAT as a percentage of their disposable income than the richest fifth.

you don't actually spend anything.
Where do I sign up for these " pensions, saving and investments that will generate me an income without me paying a penny?

Any bank you like. You still own the money that the income is derived from. Just because you moved it from one place to another doesn't mean its not yours anymore.

and from your link

Finally, the data shows the poorest fifth of households in the
UK pay more in VAT as a percentage of their disposable income than the richest fifth.

I think disposable income falls under the category of 'income' (the giveaway is in the name) which wasn't the point.

The issue is not whether it is mine but whether I have to spend to get a pension or to invest. Do I need to take money that is mine and buy something ?
Do I ?

You may possibly have a point, certainly more of a point, about savings but that is just spending your money to get interest. It could be debated to be fair but i dont see how you can argue you dont spend to get a pension nor to invest.
Strange definitions you are using here tbh.

Thanks for saying disposable income is income that clarification was clearly required 😕

Thanks for saying disposable income is income that clarification was clearly required

Evidently 😉

You're right with regards to investments as they carry a risk of not returning your money, but I think with savings (in particular thanks to the underwriting of our gov't) where there is no risk of not returning your capital, you cant consider that spending. Pensions probably lie somewhere in a murky middle ground of little or no risk, but not guaranteed either.

The reason I object to the concept of VAT being considered regressive is that it tends to pre-suppose that the concept of a tax which is bigger as a percentage of [i]income[/i] being unfair, which isn't in my mind true. The only fair taxation is one where taxes are based solely on consumption. Where each individual is taxed based on what they consume, not what they earn, or how much of that is left over to buy VATable things each month. Corporation tax would be an example where this works well. Corporations 'consume' the resources of a nation, whether it be in a literal sense of digging things out of the ground, or in a more intangible sense in consuming the ability of its residents to buy goods and services, thanks to a stable economy, sound legal framework and functioning infrastructure. Where CT falls down of course is that there are lots of companies that aren't paying tax for the enjoyment of such consumption, and that should be ended.

However when it comes to individuals, the consumption is fixed to a greater degree. 1 person uses 1 resource unit (more or less on average). Income is arguably a factor of all the things benefitting a company, and so its right that income should be taxed in relation to earnings, as that opportunity to earn only exists because of the environment created for the person, but for other consumption such as council tax etc. where there is a fixed expenditure, the only truly fair tax would be for everyone to pay the same... but of course that doesn't work in reality, as in order for that to work everyone would have to be able to pay the newly re-distributed taxation (lower for the rich, higher for the poorer no doubt). So what is actually needed is not a [i]fair[/i] tax system, as that isn't going to work, its a practical system that actually functions properly in order that everyone is able to afford to pay for the things they need to pay for. That means an unfair distribution of taxation to the richest, in order to support the poor. It means low or no taxation on services consumed for a proportion of society. Thats why I think the concept of labelling a tax regressive or progressive when it doesn't relate to income is a bad precedent as it assumes that regression must be unfair by correlating two unrelated inputs and outputs. Taxation is not a matter of a fair system, its a matter of a necessary system thats as fair as it can be, and in my opinion the more progressive a tax other than income tax, the less [i]fair[/i] it becomes, irrespective of its necessity.

Of course a progressive tax is not "fair" but its not fair that the top 100 people have 50% more than the bottom 30%

IME people who complain about unfair taxes rarely have a problem with unfair incomes so whatever their concern is its not actually fairness.

I will accept fair taxes when we have fair income and wealth
The overwhelming majority of the population share the view that the rich should pay more [%] in taxation.

Of course a progressive tax is not "fair" but its not fair that the top 100 people have 50% more than the bottom 30%

IME two wrongs never make a right.

I will accept fair taxes when we have fair income and wealth
The overwhelming majority of the population share the view that the rich should pay more [%] in taxation.

How about we all work on fair income in our environment of already unfair taxation? Seems like its a win win for everyone?

So Robin Hood was a baddy then 😉

Umm. He didn't exist... but you know supposing he did, he was a guy who stole from other people that stole from other people. In essence he was returning what was stolen. What you're proposing is that society believes that its right to make an already unfair taxation system even more unfair in order to essentially penalise people for doing well.

I actually know a billionaire. A legitimate, sunday times listed billionaire. He is a thousand times richer than we could ever dream of being most likely. I can tell you for a fact that he didn't get there through inherited money, illegal deals or otherwise. He got there through taking a chance, gambling it all and making good deals. He's got the foresight to buy cheap and sell high. Yes he's a tax exile, but he plays by the rules (only living in the UK for x days a year), and I bet he pays more in tax per year to the UK gov't than every person reading this thread combined. I say fair play to him, he pays more than his way, he doesn't ask for any more than the next guy in return, and he's by my reckoning paying more than his fair due already.

How about we all work on fair income in our environment of already unfair taxation?

It is (genuinely) worth reading Piketty on this. Takes about a week.

Poor side step
You know the point that was made.
I know someone who has a copy I will take you up on that

Poor side step
You know the point that was made.

Yeah I know the point that was made. I gave it the sympathy it deserved.

Its alright to steal as long as its from the rich because you know, they obviously stole from everyone else to get there right?

Yes that is the real message behind Robin Hood everyone knows that 🙄

We were having a decent debate IMHO

Not agreeing but not doing that

Walks away

EDIT even more so with the eidt do I walk away

Seriously? After some real actual debate (I was quite enjoying by the way), you come up with a cheap one-line (albeit spread over 2) shot like:

Poor side step
You know the point that was made.

and you're walking away surprised at my refusal to engage? You can't get the debators these days I tell you. 🙂

EDIT: In all fairness it seems like you disliked another comment of mine, but one I did edit out 10s after I posted it because I didn't like it either, so maybe there's something we agree on after all. You're comment however does make it rather unfairly look like I edited that after you posted your comment on it, which I didn't, for the record, m'lud.

benpinnick - Member
pension , savings, investments
none of those would qualify as expenditure in my mind,

Indeed Ben that is true. As mentioned several times earlier VAT is an expenditure/consumption tax. By definition, savings are the opposite of consumption since by definition:

Income (Y) = Consumption (C) plus Savings (S) or Y - C = S

So to mix this up with income is merely an exercise in distortion to make a point. In fact the main reason why the use of VAT has grown so rapidly across developed and emerging economies (is nothing to do with Tory wet dreams) is the fact that it is essentially a neutral tax since it does not distort production decisions (or business structure) nor does it impact/discourage saving or investment. That is why it's popular - indeed it is the second most important tax across the OECD (30% of total tax on average) for the simple reason that it is effective and broadly neutral.

Politicians will be pretending that currency is an asset next, honestly!!

Politicians will be pretending that currency is an asset next, honestly!!

Didn't they do that during the Scots independence vote?

Actually bin that, we don't need to add that topic into this debate, the nuclear (subject) matter might go critical.

😀