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

The won't work dole scroungers you mean?

IronGiant

No, there are members on here who think that.

Sonic67

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

Sonic67

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

Jezza99

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