40% VAT, could it work?
Discussion
Bear with me here, but I've had a sort of idea;
What about getting rid of every single tax and national insurance payment, including fuel tax, income tax, council tax, capital gains tax and so on and replacing it with a 30 or 40% VAT on everything? It would mean the government could cut it's spending on employment by an enormous amount and it would make evading tax absolutely impossible. A certain percentage of the revenue raised could be ring fenced to be spent on government employment projects like road building, community improvements, policing and other things that would improve the country as a whole. The theory behind this is that it would negate the rise in unemployment from public sector job losses and provide accessible work for currently unemployed people.
Another percentage of the revenue could be ring fenced to pay off the deficit.
I haven't looked closely enough at the figures to be sure of what the VAT percentage itself would need to be in order to keep revenue the same as now, but it wouldn't need to be in the long run.
The only thing that I can see being difficult is the transition. How would it be handled? Also the public sector would go nuts, but they do that anyway so no great loss there.
It's almost an extension of an idea I heard about lumping car tax onto fuel duty, but could it work on a larger scale?
Discuss.
What about getting rid of every single tax and national insurance payment, including fuel tax, income tax, council tax, capital gains tax and so on and replacing it with a 30 or 40% VAT on everything? It would mean the government could cut it's spending on employment by an enormous amount and it would make evading tax absolutely impossible. A certain percentage of the revenue raised could be ring fenced to be spent on government employment projects like road building, community improvements, policing and other things that would improve the country as a whole. The theory behind this is that it would negate the rise in unemployment from public sector job losses and provide accessible work for currently unemployed people.
Another percentage of the revenue could be ring fenced to pay off the deficit.
I haven't looked closely enough at the figures to be sure of what the VAT percentage itself would need to be in order to keep revenue the same as now, but it wouldn't need to be in the long run.
The only thing that I can see being difficult is the transition. How would it be handled? Also the public sector would go nuts, but they do that anyway so no great loss there.
It's almost an extension of an idea I heard about lumping car tax onto fuel duty, but could it work on a larger scale?
Discuss.
It's a tax on consumption, which is what drives modern economies, so I'm not sure you'd want to stifle that, even if everyone was income-tax free. It could also probably be argued that it would hit the poor harder than the rich- lower classes spending a higher proportion of their wealth on consumption as they do.
Black markets would probably explode, too, even if the simplification left people with more money. All in all I don't think it could sucessfully replace income tax. Though you have made me wonder- what tax on the common man was there before income tax started? Was it a VAT analogue?
Black markets would probably explode, too, even if the simplification left people with more money. All in all I don't think it could sucessfully replace income tax. Though you have made me wonder- what tax on the common man was there before income tax started? Was it a VAT analogue?
glazbagun said:
It's a tax on consumption, which is what drives modern economies, so I'm not sure you'd want to stifle that, even if everyone was income-tax free. It could also probably be argued that it would hit the poor harder than the rich- lower classes spending a higher proportion of their wealth on consumption as they do.
Black markets would probably explode, too, even if the simplification left people with more money. All in all I don't think it could sucessfully replace income tax. Though you have made me wonder- what tax on the common man was there before income tax started? Was it a VAT analogue?
People still buy things in countries that are more expensive than ours. Usually their expendable income is higher too so I don't see that, in particular, being a problem.Black markets would probably explode, too, even if the simplification left people with more money. All in all I don't think it could sucessfully replace income tax. Though you have made me wonder- what tax on the common man was there before income tax started? Was it a VAT analogue?
Sure, the black market would probably explode, but some of those ring fenced funds for policing could be allocated to increased border controls.
Actually I've just had another thought. The unemployed get cash from taxpayers, which they then spend on consumption (and rent, etc). Since VAT would not discriminate between employed and unemployed, they'd be paying a much larger share of their benefits back to the state. And even a minimum wage job would begin to look appealing if it was completely tax-free.
clarkey328is said:
What about getting rid of every single tax and national insurance payment, including fuel tax, income tax, council tax, capital gains tax and so on and replacing it with a 30 or 40% VAT on everything?
I haven't looked closely enough at the figures to be sure of what the VAT percentage itself would need to be in order to keep revenue the same as now...
It isn't hard to look up the figures - VAT would have to be near-as-dammit 100% just to make up for the revenue lost from income tax and NI, never mind the other taxes and duties.I haven't looked closely enough at the figures to be sure of what the VAT percentage itself would need to be in order to keep revenue the same as now...
And that's assuming spending carried on at current rates - how many people would be put off buying things if they were getting on for twice the current price?
Pretty chart here:
http://www.parliament.uk/business/publications/res...
Edited by Deva Link on Thursday 3rd November 12:44
tclarkey328is said:
What about getting rid of every single tax and national insurance payment, including fuel tax, income tax, council tax, capital gains tax and so on and replacing it with a 30 or 40% VAT on everything?
Thus increasing taxes dramatically on the poorest in our society while deliveroing a substantial reduction for the rich.Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff