Do we need a VAT reform?

[soupdragon]

Lot of chat in various places about government finances, should we raise income tax etc etc...left v right, social inequality, Corbyn's money tree and how will he pay for all his 'great' ideas...etc etc etc

Does the best solution actually sit in a VAT reform?

Some are opposed against the Labour socialist stance, taxing the more well off but haven't the tories just implemented some 'socialist' policies? Car Tax rules being one of them. Ie, if you can afford an expensive car, we're going to tax you more now.

Its got me thinking about VAT. I needs shaken up. There are lots of people who some might consider 'well off'. Eg, £60k salary so lets tax the hell out of them. But if that one salary is running a family of four or five, by the time the tax man and mortgage payments are made, they are actually far from 'well off' as some may assume.

This is where income tax banding has serious flaws IMO.

If we had a blank canvas to start again, would we put these bands in place again?

When it comes to giving everyone a reasonable lifestyle, there are better ways to generate tax, NI and VAT income.

One example might be TV, broadband, mobile phone contracts. Make them VAT free at entry level, and only apply VAT for premiums. Eg - TV's below £500 are VAT free, anything above - 25%. Same for basic comodities like phone and broadband. Every house should have that as a bare minimum but if you want superfast broadband - 25% please.

There is no VAT on clothing but actually, maybe any clothing and shoes above, say, £50 get a 25% VAT applied.

Do you see where I'm coming from?

The families who are struggling will get VAT relief which will generate a bit extra cash by paying less VAT- and those who can truly afford more luxury things, they have a choice - if you want the luxury item, its going to cost you more. Same for cars, £10k and below is VAT free and then 25% for everything else. This sort of approach will ensure that those families who are 'well off' on paper but actually aren't will not be hurt as much as those families with say 2x£50k salaries.

This sort of approach means yes, you are taxing the 'well off' but the key point being, well off isn't decided by your salary - well off is decided by the amount of luxuries you and your family can afford.

I truly believe this has the potential to be the most fairest solution of raising government income in a way that suits more people, rather than the flawed system we have now.

I know there would be big opposition from industry - eg, the fashion industry - zero VAT to 25% VAT could really hurt them so there are those hurdles to overcome but I think its a route that our government needs to consider.

Thoughts?

 

[Jezza99]

The key to successful taxation is simplicity. The tiers you propose would create confusion and massive market distortions due to the arbitrary cliff edges.

I would be open to VAT reform, such as an across the board rise to a 25% rate, with more exemptions such as adult clothing and fuel. That way, it becomes more of a tax on discretionary items rather than essentials.

If you want real reform, then lets look at a flat income tax as well. That will get the liberals choking on their organic muesli.

 

[domtheone]

If there was a VAT reform, I would go with a much lower rate (greedy government(s) taking 20% is taking the ****). In Aus, the rate is 10%. 10% seems fair to me.

If, as a result of this, VAT has to be added onto more things, so be it.

Simplification is the key and the government should be aiming for this (as well as the tax rate - agree with above re flat rate tax).

By and large, one rate (10%) with a few exemptions (food etc - fuel too should be exempt).

Once we're out of the EU, I would urge the Tories to make the next VAT change a cut.

10% is wishful thinking but, a move back to 15% (with a suggestion of a desire to reduce further) would be a good start.

 

[Pacifico]

25% on non-essentials.

 

[IronGiant]

That idea runs into problems when some consider the latest generation games console to be an essential.

 

[Goooner]

That idea runs into problems when some consider the latest generation games console to be an essential.

The won't work dole scroungers you mean?

 

[IronGiant]

No, there are members on here who think that.

 

[Sonic67]

There is no VAT on clothing but actually, maybe any clothing and shoes above, say, £50 get a 25% VAT applied.

There is no VAT on children's clothing. The rest is at 20%.

 

[Deleted member 13294]

There is no VAT on children's clothing. The rest is at 20%.

There effectively is vat on children's clothing. As my 6'1 14 year old son demonstrates.

 

[Sonic67]

There effectively is vat on children's clothing. As my 6'1 14 year old son demonstrates.

Works both ways. If you were Warwick Davis you might be able to do some shopping in Mothercare.

 

[Deleted member 13294]

Works both ways. If you were Warwick Davis you might be able to do some shopping in Mothercare.

All three of my kids have needed adult clothing since about 11.

I'm pretty sure the numbers of children needing adult clothes is higher than the number of Warwick Davies.

But either way, it shows the system of vat on adult clothes but not on children's is flawed.

 

[Jezza99]

What about a special Tattoo tax ? Maybe doubled for those on the face, neck and legs.

 

[IronGiant]

All three of my kids have needed adult clothing since about 11.

Similar here, but with shoes.

 

[domtheone]

What about a special Tattoo tax ? Maybe doubled for those on the face, neck and legs.

And link the tax to income?

Given how many tattoos celebrities/footballers seem to have done, we'd probably clear the current deficit with ease

 

[IronGiant]

Property Tax: 0% on personal residence, 80% on a second property and 90% on a third one. It won't have any effect on the poor, won't stigmatise them in the same way a differential VAT rate for luxuries might and could free up a substantial amount of property.

 

[Jezza99]

Property Tax: 0% on personal residence, 80% on a second property and 90% on a third one. It won't have any effect on the poor, won't stigmatise them in the same way a differential VAT rate for luxuries might and could free up a substantial amount of property.

Wouldn't that be a tad unfair on any BTL landlords...?

 

[Deleted member 27989]

I'm not against an increased rate on luxuries if the calculations support the case. It is a choice. I'd love to see the models supporting an increase in intake though.

 

[Deleted member 27989]

Wouldn't that be a tad unfair on any BTL landlords...?

They'll pass it on to their tenants unless it is LGS ofcourse.

 

[domtheone]

Property Tax: 0% on personal residence, 80% on a second property and 90% on a third one. It won't have any effect on the poor, won't stigmatise them in the same way a differential VAT rate for luxuries might and could free up a substantial amount of property.

Said before that i'm generally against most tax increases and, favor a low tax society.

However, property is like a rope around this country's neck, so, this is one occasion where i'd favor massive tax hikes on multiple property owners (especially foreign million/billionaires land banking).

Those in the game long enough have made monster fortunes from the shambles so i have little sympathy for them if they faced significant tax increases.

Stamp duty paid by the seller instead of the buyer too.

Making property less of an investment, and more of a house over ones head, should be one of the highest priorities for government.

 

[Pacifico]

Property Tax: 0% on personal residence, 80% on a second property and 90% on a third one. It won't have any effect on the poor, won't stigmatise them in the same way a differential VAT rate for luxuries might and could free up a substantial amount of property.

Not much incentive then to increase the amount of property available, a rise in homelessness may be an unintentional consequence.

 

[IronGiant]

It wasn't a serious suggestion.

 

[Deleted member 27989]

Not much incentive then to increase the amount of property available, a rise in homelessness may be an unintentional consequence.

I'm probably having a blonde moment, sure the intention of that was to make more homes available rather than create more landlords...Drive the prices down a bit as well. Lower prices are better in my opinion, sure I'll loose a lot as well, but then again I never really had it, my children will have a lot to gain as will yours...

 

[Pacifico]

I'm probably having a blonde moment, sure the intention of that was to make more homes available rather than create more landlords...Drive the prices down a bit as well. Lower prices are better in my opinion, sure I'll loose a lot as well, but then again I never really had it, my children will have a lot to gain as will yours...

if you make it financially unviable the rent out property there is no incentive to invest and bring more property to the market.

If you want prices to fall then you make it easier to build and refurbish, not harder.

 

[IronGiant]

There are plenty of arguments that the buy to let market is what fuelled the most recent expansion of the house price bubble. Ignore the 80% suggestion, that was just a pop at people who think it's fine to raise money by taxing people at 80% (for anything) especially when there is no chance they will be personally affected by it.

 

[Jezza99]

that was just a pop at people who think it's fine to raise money by taxing people at 80% (for anything) especially when there is no chance they will be personally affected by it.

Do we know anyone like that? Anyone who could be so self centered?