VAT could come down to 8% / 10% to 1973 levels ?

Prices are shooting up because of financials (many say it is Brexit).

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But one financial parameter is largely ignored or hidden from the public from discussion.

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One prominent tax could be changed to what it was before, when we joined EEC, in 1973, as we don't need to "waste" so much consumption tax to boost two/three layers of governance. Some thing(s) had happen to double consumption tax from 10% to 20%, but we consume much more goods and services compared to 1973 so there was growth in VAT collected anway even without rate increase.

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Why does the governance need twice as much VAT as it could/should go back to the equivalent level of Purchase Tax (pre-VAT) level. (Which is about 33% rate at manufacturing cost or about 10% at consumer prices.) An impact of reducation of VAT from 20% to 10% is possible since prices are going up 20% anyway thus increasing total VAT revenue by 20%, moreover, we could/would collect money from tariffs like we did before.

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Source of rate changes, see this link

https://en.wikipedia.org/wiki/Value-added_tax_(United_Kingdom)

96 Comments

Original Poster

http://www.staticwhich.co.uk/media/images/adhoc/vat-rates-graphic-356265.gif

Nope. Terrible idea with the prospect of a shrinking economy likely to reduce tax receipts in the mid to long-term.

What you're suggesting would lead to public service cuts for the most vulnerable in society when they'll need them most. If anything you'd need to increase VAT and tax free allowances to reduce the burden on the poorest in society.

Original Poster

HotEnglishAndWelshDeals

Nope. Terrible idea with the prospect of a shrinking economy likely to … Nope. Terrible idea with the prospect of a shrinking economy likely to reduce tax receipts in the mid to long-term.What you're suggesting would lead to public service cuts for the most vulnerable in society when they'll need them most. If anything you'd need to increase VAT and tax free allowances to reduce the burden on the poorest in society.


In 1973 we had 56 million people and we had managed fine with 10% VAT and we had plenty of public services that poor people were very happy with including plenty availability of social housing. But we didn't have so many public sector headcount (including outsourced to private companies) then, that's was all based on paper and manual methods. How come with computer tools we employ so many more?!
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I am talking about a rate (calculated by the %) and not the absolute amount.
Note ,

So how much lost tax revenue would that equate to and how would the shortfall be made up? #PieInTheSky.

Sounds like a great idea. In fact it's so great I can't believe the greatest financial brains in the country didn't think of it.

Yeah why not ? and do away with poll tax and TV licence tax while you are about it
But the fact is it will have to paid for by putting up income tax

Original Poster

deeky

Sounds like a great idea. In fact it's so great I can't believe the … Sounds like a great idea. In fact it's so great I can't believe the greatest financial brains in the country didn't think of it.


They (economist, finaciers, politicians, historians) know about this of 10% versus 20% VAT in the UK. Also it is a no brainer too compared with many countries have much lower consumption tax or even zero, e.g. Hong Kong
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http://taxfoundation.org/sites/taxfoundation.org/files/docs/LOST--2015.png

Original Poster

Agharta

So how much lost tax revenue would that equate to and how would the … So how much lost tax revenue would that equate to and how would the shortfall be made up? #PieInTheSky.


That would be substantial decrease in tax revenue but it is a rate of tax, as I said before we had managed very well in the 1970s with about 56 million population. And since than we had healthier people, harder workers, higher productivity (except still way behind of Germans, Japanese and Americans).
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I have confidence that the Treasury be able to re-model this taxation as the huge burst in outgoings (expenses) could be scrapped to relative amounts of tax incomes and expenses back to 1970s/1980s relative rate levels. USA is managing fine.

Original Poster

thewongwing101

Yeah why not ? and do away with poll tax and TV licence tax while you are … Yeah why not ? and do away with poll tax and TV licence tax while you are about itBut the fact is it will have to paid for by putting up income tax


I don't see why we should or need to, look at USA and Canada plus Australia and copy the way that they do things, not necessarily everything but some good aspects. Namely, look at the resource metrics such as "how many spades we need in UK to dig a hole" and "how many spades they use to dig a hole." This latter group of productivity and efficiency is documented by statistical research agencies.

splender

I don't see why we should or need to, look at USA and Canada plus … I don't see why we should or need to, look at USA and Canada plus Australia and copy the way that they do things, not necessarily everything but some good aspects. Namely, look at the resource metrics such as "how many spades we need in UK to dig a hole" and "how many spades they use to dig a hole." This latter group of productivity and efficiency is documented by statistical research agencies.


Yeah and just look at the state of their public services(or lack of)

Original Poster

thewongwing101

Yeah and just look at the state of their public services(or lack of)


You got to look at many countries to take decision , look at Australia, GST is 10%, Canada, various rates up to 10%. Sales Tax Rate in Switzerland stands at 8 %. In Japan, consumption tax is a flat 8% on all items and is scheduled to increase to 10% in April 2017. Singapore 7%, but Ireland 23%.

With tax you need to look at the total tax collected via multiple means (Income Tax, National Insurance, VAT etc) to make a comparison with other countries.
But if you really want to compare countries in depth you need to look at things like Health Insurance, Average Wages etc to see the full picture.
If you drop VAT to 10% and raise other taxes to compensate there will be winners and losers. So if you do that you should be clear on how you intend to redistribute the tax burden.
How would you like to see it redistributed?

Original Poster

Agharta

With tax you need to look at the total tax collected via multiple means … With tax you need to look at the total tax collected via multiple means (Income Tax, National Insurance, VAT etc) to make a comparison with other countries.But if you really want to compare countries in depth you need to look at things like Health Insurance, Average Wages etc to see the full picture.If you drop VAT to 10% and raise other taxes to compensate there will be winners and losers. So if you do that you should be clear on how you intend to redistribute the tax burden.How would you like to see it redistributed?


We know total tax needs to be calculated, but before, circa 1973 we had for many years had Purchase Tax and then this changed to VAT. The overall burden on people seems to be more tax both as rates and as absolute amount. Of course, we have many more people employed in public sector services but it is questionable how many of them could be cut because we have to live within our means (cut cloth according to size). You may recall that Cameron came in and drastically cut the number of quangos.
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And then there are a myriad of tax burdens that we did not have in 1970s/1980s such as working tax credits and child tax credit as a result of huge rises in low paid jobs but these costs are coming down. The spin off is that there is a huge rental income for private landlords. It is well known that local governments have moved away from social housing construction but instead depend on private landlords (just like France as here, landlord investment is huge in this sector of social housing provision). These welfare benefits have partly gone onto increases in rental and property prices. I am not saying this is right or wrong politics, but these policies did have a major change of the bigger increases in welfate costs relatively.
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This is why the tax revenue as a percentage rate of GDP has gobe up, see here en.wikipedia.org/wik…dom
Note again, I am looking at the overall burden (increase of overall rates) rather than the distribution of who pays how much.
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http://ichef-1.bbci.co.uk/news/624/cpsprodpb/14443/production/_86211038_imapct_tax_credits_624_v3.png

Edited by: "splender" 30th Oct 2016

The top rate of income tax in 1973 was 90%. That may go some way to explaining why VAT was much lower then.

RonChew

The top rate of income tax in 1973 was 90%. That may go some way to … The top rate of income tax in 1973 was 90%. That may go some way to explaining why VAT was much lower then.



I was told people used to stop working after they reach the 90% threshold as it made no sense to continue. It was a very counter productive tax policy that encouraged citizens to stop working.

mutley1

I was told people used to stop working after they reach the 90% threshold … I was told people used to stop working after they reach the 90% threshold as it made no sense to continue. It was a very counter productive tax policy that encouraged citizens to stop working.


People left the country such as the Rolling Stones went to France for tax purposes but then Keef was 'taxed' by his local dealer.

mutley1

I was told people used to stop working after they reach the 90% threshold … I was told people used to stop working after they reach the 90% threshold as it made no sense to continue. It was a very counter productive tax policy that encouraged citizens to stop working.


It went up to 98% in 1974 but, like the 90% rate it was only on investment income. The top rates for earners were 75% in 1973 and 83% in 1974. You had to be in, probably, the top (less than) 1% of earners to be liable at those rates. I'm not sure that many of these people could choose to stop working at a certain point in the year though there were 'schemes' around to reduce tax.

deeky

Sounds like a great idea. In fact it's so great I can't believe the … Sounds like a great idea. In fact it's so great I can't believe the greatest financial brains in the country didn't think of it.



They probably have but EU reg's wont allow us to drop VAT any lower than 15%.

thewongwing101

Yeah why not ? and do away with poll tax and TV licence tax while you are … Yeah why not ? and do away with poll tax and TV licence tax while you are about itBut the fact is it will have to paid for by putting up income tax


No it won't. In fact, scrap income tax first, it's atrocious.

Fred Smith

They probably have but EU reg's wont allow us to drop VAT any lower than … They probably have but EU reg's wont allow us to drop VAT any lower than 15%.


So it could be reduced to 15% which would be quite a big reduction. If they thought about it then, clearly, they discarded the idea.

Rubisco

No it won't. In fact, scrap income tax first, it's atrocious.


The yield from income tax and national insurance (income tax by any other name ) is about two and a half times that of VAT. So, very roughly, VAT would have to go up to 50% to give the same yield. Political suicide?

RonChew

The top rate of income tax in 1973 was 90%. That may go some way to … The top rate of income tax in 1973 was 90%. That may go some way to explaining why VAT was much lower then.



In 1973 Purchase Tax was 25%.

Fred Smith

In 1973 Purchase Tax was 25%.


Purchase tax was abolished when VAT was introduced in April 1973. We can blame the EU for that.

deeky

Sounds like a great idea. In fact it's so great I can't believe the … Sounds like a great idea. In fact it's so great I can't believe the greatest financial brains in the country didn't think of it.

Fred Smith

They probably have but EU reg's wont allow us to drop VAT any lower than … They probably have but EU reg's wont allow us to drop VAT any lower than 15%.



"They" do.

The Standard Rate cannot be lower than 15%.

Each EU member state may have up to two reduced rates of at least 5% (for a restricted list of goods and services).

For example, a Reduced Rate (of 5%) & a Super Reduced Rate of 0%.

Some member states have a Parking Rate applied to the supply of goods or services. This rate cannot be lower than 12%.

Of course, some products (food & children's clothes, for instance) are exempt from the scheme completely.

[ ec.europa.eu/tax…_en ]

[ ec.europa.eu/tax…pdf ]

RonChew

The yield from income tax and national insurance (income tax by any other … The yield from income tax and national insurance (income tax by any other name ) is about two and a half times that of VAT. So, very roughly, VAT would have to go up to 50% to give the same yield. Political suicide?


National Insurance is even worse. In the case of employer's contributions we are directly taxing companies for having the audacity to employ people!

We're not limited to increasing the taxes we currently charge in order to decrease another, there are hundreds of other possible taxes.

Rubisco

National Insurance is even worse. In the case of employer's contributions … National Insurance is even worse. In the case of employer's contributions we are directly taxing companies for having the audacity to employ people!We're not limited to increasing the taxes we currently charge in order to decrease another, there are hundreds of other possible taxes.


Income tax, national insurance and VAT represent roughly 70% of the total tax yield in this country. I'm not sure there's a great deal of scope for finding that sort of revenue from elsewhere.

RonChew

The yield from income tax and national insurance (income tax by any other … The yield from income tax and national insurance (income tax by any other name ) is about two and a half times that of VAT. So, very roughly, VAT would have to go up to 50% to give the same yield. Political suicide?



So a small increase in the highest rates 40% and 45% for incomes between £43,001 to £150,000 and over £150,000 would easily counteract a cut in VAT. And a cut in VAT will not only benefit the poorest in society but would also be a massive boost to the tourism industry and UK manufacturing.

RonChew

Income tax, national insurance and VAT represent roughly 70% of the total … Income tax, national insurance and VAT represent roughly 70% of the total tax yield in this country. I'm not sure there's a great deal of scope for finding that sort of revenue from elsewhere.


Dare to dream.

Fred Smith

So a small increase in the highest rates 40% and 45% for incomes between … So a small increase in the highest rates 40% and 45% for incomes between £43,001 to £150,000 and over £150,000 would easily counteract a cut in VAT. And a cut in VAT will not only benefit the poorest in society but would also be a massive boost to the tourism industry and UK manufacturing.


Income tax rises have always been regarded as political suicide so, no matter how good an idea that may be, I doubt that Mrs May and her Merry Men would even consider it.

RonChew

Purchase tax was abolished when VAT was introduced in April 1973. We can … Purchase tax was abolished when VAT was introduced in April 1973. We can blame the EU for that.



So in 1973 purchase tax was 25% and income tax was 90%.

http://i.imgur.com/Fbwj1aw.jpg

Will vat be dropped from domestic power bills now as we no longer have to have it added to them because of some obscure EU law ? Doubt it,UKplc is skint and the next crash will be worse than the last one.

Fred Smith

So in 1973 purchase tax was 25% and income tax was 90%.


Income tax only became 90% from April 1973 when the unified tax system replaced the old income tax and surtax regimes. And, of course, VAT was introduced at the same time. Though I think that the top rate of income tax and surtax probably was around 90% before April 1973 but very few people paid that rate. There were also a myriad of different purchase tax rates depending on how 'luxurious' goods were!

deeky

Sounds like a great idea. In fact it's so great I can't believe the … Sounds like a great idea. In fact it's so great I can't believe the greatest financial brains in the country didn't think of it.

Fred Smith

They probably have but EU reg's wont allow us to drop VAT any lower than … They probably have but EU reg's wont allow us to drop VAT any lower than 15%.



We can all Google and we all know that thanks to a one-off act of EU benevolence VAT on energy, tampons, loft insulation, mobility scooters and solar panels are allowed to be set at a lower rate than standard rate VAT but can never more be zero rated.

Does HUKD have a badge for pedantry? - If it does you should apply.

RonChew

Income tax only became 90% from April 1973 when the unified tax system … Income tax only became 90% from April 1973 when the unified tax system replaced the old income tax and surtax regimes. And, of course, VAT was introduced at the same time. Though I think that the top rate of income tax and surtax probably was around 90% before April 1973 but very few people paid that rate. There were also a myriad of different purchase tax rates depending on how 'luxurious' goods were!



How many people pay the top rate (45%) now?

Banned

Is it not the case that gates of VAT can never be removed or lowered?

I'm fairly sure that's a ruling of this wonderful EU.

Luckily we'll change things as we please soon.

Banned

ICBMiss

Is it not the case that gates of VAT can never be removed or lowered?I'm … Is it not the case that gates of VAT can never be removed or lowered?I'm fairly sure that's a ruling of this wonderful EU.Luckily we'll change things as we please soon.



Yep

Minimum VAT levels are set by the EU

Banned

YouDontWantToKnow

YepMinimum VAT levels are set by the EU



We should vote to leave. X)

Banned

ICBMiss

We should vote to leave. X)



What a waste of time & money that would be. No one will vote leave.

ICBMiss

We should vote to leave. X)


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