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) No, that oversimplifies the effects on business. Just one example; there are times – such as when a firm invests in new machinery and other capital items – where it pays out VAT and then has to (struggle sometimes) to get HMRC to refund at the end of the VAT quarter. (Many finance arrangements will not allow the financing of the VAT element.)

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 have a vision of an STWer standing outside a bike shop asking a kid to go in and buy a bike for them.

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.
http://www.equalitytrust.org.uk/sites/default/files/attachments/resources/Unfair%20and%20Unclear_0.pdf
(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 per head than the rich? But as its only a proportion of their income then its fine

When you think about it

what happens if you don’t 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.

We know that is why we look at the % [ do you know what regressive means?]. I dont think we need research to show that a millionaire pays more tax than a pauper, well I dont.

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

Ooh the subtle approach 😕 You forgot to mention Sky and tattoos for the full house

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.

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.

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.

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

Ok so you agree it is regressive then

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

Right so now you dont agree its regressive 😕

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

Well the Tories favours this approach as does the republican party in America [ and possibly you]… lefties eh
FWIW 96% support a more progressive tax system than we have currently so its a pretty clear majority who think the rich should pay more than the poor.
IMHO if you need the reason explaining to you you still wont agree.
Those with the broadest shoulder should bear the greatest burden and remember how broad they are

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.

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

The point is the rich have many zero rated items as well – pension , savings, investments, possibly even childcare or cleaners etc. The poor spend everything just to stay alive.

as aracer states I dont think it is a given either

pension , savings, investments

none of those would qualify as expenditure in my mind, they are income generating not expenditure – you don’t actually spend anything. I’m not saying VAT is a good or a bad tax, just that I think the whole concept of regressive taxation being based on a relationship to income that may well not exist is flawed… and therefore to base policy on it would be equally flawed.

Based on these numbers from the ONS – http://www.ons.gov.uk/ons/dcp171776_239565.pdf %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 income 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 fair 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 fair 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.

😀