A Radical Suggestion

[jambutty]

SCRAP ANY FORMS OF TAXATION ON EARNED AND UNEARNED INCOME.

Meaning scrap Income Tax and National Insurance Contributions on wages and salaries and tax on savings, share dividends and other forms of unearned income.

I can almost see certain members frantically reaching for their keyboards with words like ‘daft’, ‘stupid idea’ and ‘this guy has finally lost his marbles’ foremost in their narrow minds, together with what they might consider as suitable insults.

But STOP – before you may an utter fool of yourself, think it through. Here, I’ll help you!

This loss of revenue to the Treasury can be recovered simply by increasing VAT on all goods that are sold be they new or second hand and on services like insurance, repairs etc and importantly spending or sending money abroad. In other words there would be a tax on any money that we SPEND and not a tax on money that we EARN.

No doubt most people would prefer no taxes at all but they are not living in the real world.

If such a radical measure was adopted, and I accept that no government would give it even a single thought, what would be the effects?

First of all the whole massive department that collects income tax would not be needed anymore and the resultant savings would be enormous. Sadly thousands of people would be chucked onto the workforce scrap heap but they are being paid from our taxes to collect money from us. Surely it is better to pay them the going dole rate than high wages with inflation proof pensions for some? They might then understand how the thousands upon thousand of manual workers felt when they lost their jobs in mining, shipbuilding, steel, cotton industry and many others.

Obviously some of the workforce would be needed to collect the VAT.

Various cash benefits would have to be increased to compensate.

The black economy, which is reckoned to run to billions per year, would be drastically reduced. People who do “work on the side” do so to avoid having to pay income tax and/or to supplement benefits. But by paying a tax on what they spend means that they would be contributing to the National Purse when they spend those ill-gotten gains.

Currently, when the Chancellor decides to hit the fat cats with higher income tax, all they do is engineer themselves an increase in salary to compensate. Thus taking cash out of the company pot that could have been used to increase the lot of the workforce. So the end result is that the fat cats still take home the same amount of cash and in all probability take home more.

Everybody, no matter how they gain their money, has to live and to live they need to spend money to buy food, pay rent or mortgage, pay for energy, water, clothes etc. Thus everyone makes a contribution to the national wealth based on their choice of how much to spend and that includes visitors to these shores.

Such a radical suggestion could also encourage people to save some of their money and isn’t that what the government wants us all to do? Save!

No doubt some smart Alec will pop up to smugly state, what rate of VAT do I propose. Not being privy to the government ‘books’ I don’t know but if were to hazard a guess I would suggest 22% on all goods and services that go to make up the National basket that is used to calculate inflation providing that it also included mortgages. Goods and services not listed in the National basket would attract a higher rate of 45%. Real luxury items, that only the very rich could afford and are well out of reach of most people, would attract at least 60% VAT.

That is just only an overall outlook and no doubt there will be many, many side issues evolving from them but I believe that problems are there to be solved and not just dismissed out of hand.

Right then, who is going to be first to indulge themselves in some name calling?

[***Mr D***]

Originally Posted by jambutty

This loss of revenue to the Treasury can be recovered simply by increasing VAT on all goods that are sold be they new or second hand and on services like insurance, repairs etc and importantly spending or sending money abroad. In other words there would be a tax on any money that we SPEND and not a tax on money that we EARN.

Just a quick one.

Insurance does not have VAT it is IPT (Insurance Premium Tax) at 5%.

[Billcat]

I think that the proposal might well hurt some major portions of the UK economy, while benefitting those industries in other countries.

Not sure what goods are in the National Basket, but I'm pretty sure that a lot of services that tourists purchase (hotel rooms and restaurant meals) are not. Increasing the VAT on these items to the proposd 45% would probably make the UK so expensive that the tourist industry would lose out in a pretty significant way, as tourists would choose other, affordable, non-UK options. Given the importance of the tourism industry to the UK economy, I think that the 45% VAT rate is a non-starter.

However, if implemented at 45%, it might benefit the USA tourism industry quite a bit. The pound is currently in a very advantageous position versus the dollar. Figure in the VAT savings that folks from the UK could realize (in addition to the savings from the exchange rate) by taking their vacations in the USA, and I think that the USA would do very well out of the deal!

[jambutty]

A rose by any other name ***Mr D***

I’m pretty sure that you are right Billcat the suggestion would hurt some businesses, those that are ripping off the public left, right and centre perhaps.

However don’t pay too much importance to the actual VAT figures quoted. It’s just a guesstimate.

My point is simply, why should we pay the wages of someone who then collects even more money from us from our hard earned income?

The UK is probably the most taxed country in the world and we do not get value for money and it is time that we did.

[cashman]

Originally Posted by jambutty

A rose by any other name ***Mr D***

I’m pretty sure that you are right Billcat the suggestion would hurt some businesses, those that are ripping off the public left, right and centre perhaps.

However don’t pay too much importance to the actual VAT figures quoted. It’s just a guesstimate.

My point is simply, why should we pay the wages of someone who then collects even more money from us from our hard earned income?

The UK is probably the most taxed country in the world and we do not get value for money and it is time that we did.

the suggestion has a lot going for it to me. pity the powers that be would never even consider it.

[***Mr D***]

Originally Posted by jambutty

A rose by any other name ***Mr D***

True......

[WillowTheWhisp]

I can think of upsides and downsides for this idea. On the upside paying tax on what you spend rather than on what you earn, and making different levels for necessities luxuries and pure indulgences sounds good and would probably benefit those less well off and encourage people to save. It might prevent some people from saving up to buy the odd luxury item though if those items were priced out of their affordability range - and who is to say what consitutes a luxury? I remember when VAT was introduced it was only for luxuries.

I do think the tourist industry would suffer, not only with people not coming here from elsewhere, but the indiginous population would probably find it much cheaper to go abroad and so air travel would also increase and with it that nasty polution you dislike. Unless of course air travel was classed as an indulgence and taxed at the highest rate.

Originally Posted by jambutty

The black economy, which is reckoned to run to billions per year, would be drastically reduced. People who do “work on the side” do so to avoid having to pay income tax and/or to supplement benefits. But by paying a tax on what they spend means that they would be contributing to the National Purse when they spend those ill-gotten gains.

Yes I see your point there - but with the demise of one black economy we'd probably see the growth of another - much more stuff falling off backs of lorries and being sold on the black market sans VAT?


It would take a heck of a lot of thinking out and I doubt any government would like to try.

[West Ender]

It's unworkable if the country is to remain solvent. Put 45% VAT on non-essentials, white goods etc., and the less well-off can't afford them and won't buy them. Put 22% VAT on essential goods, food etc., and the less well-off and the indolent become ill-nourished and a potential drain on the already ill-funded NHS.

The revenue could not be recouped to the extent that it is by Income Tax so all the public services suffer - notwithstanding the "massive" (in fact reducing to ludicrously small figures and potential chaos) amount of people which presently helps maintain the coffers being "put on the dole" but with little money in the Exchequer with which to pay the said "dole". You might also bear in mind that the front-line officer in revenue collection earns, on average, much less than the badly-paid nurse in the NHS whose wages that officer's work provides the wherewithall to pay.

No one likes being taxed, I certainly don't, but of all the imperfect systems available Income Tax is the fairest and the most workable. That there are anomalies within the system is not denied, nor that the highest paid do better out of the deal than the lowest but that is the result of Government legislation and the only weapon against that is the vote - in theory.

[jambutty]

There will always be someone who finds a way around anything given time. That’s why homo sapiens have progressed to where we are now. But that doesn’t mean that loopholes shouldn’t be sealed.

I’m more than sure that our government wouldn’t even pay lip service to the suggestion WillowTheWhisp but there is no harm in discussing a possible if not probable solution. You never know it might trigger something.

You seem very sure of your statements West Ender. Are you privy to the UK plc accounts? It is all too easy to state this won’t work or that won’t work so how about putting some meat on your skeleton of dismissal. For starters what are the contents of the National Basket? How many items are in it? How often are the prices checked?

[West Ender]

Originally Posted by jambutty

You seem very sure of your statements West Ender. Are you privy to the UK plc accounts? it?

Are you?

I know how the Revenue works, and its relevance to the country's economy. I also have my reasoned opinion, just as you have yours.

[jambutty]

Nope!

That is why my opinion isn’t an opinion but a suggestion of how the tax issue might be handled.

[Mancie]

Originally Posted by jambutty

The black economy, which is reckoned to run to billions per year, would be drastically reduced. People who do “work on the side” do so to avoid having to pay income tax and/or to supplement benefits. But by paying a tax on what they spend means that they would be contributing to the National Purse when they spend those ill-gotten gains.

Who has "reckoned" the so called balck economy runs into billions? how many people do you know that work on the side and claim benifits?..and what about the people in our society that depend on these so called benifits.. such as state pensioners? do they have to pay this massive hike in VAT on what they buy to compensate for someone who for example.. feels like buying a speed boat or yatch from the nil tax they pay?

[Ianto.W.]

Originally Posted by Mancie

Who has "reckoned" the so called balck economy runs into billions? how many people do you know that work on the side and claim benifits?..and what about the people in our society that depend on these so called benifits.. such as state pensioners? do they have to pay this massive hike in VAT on what they buy to compensate for someone who for example.. feels like buying a speed boat or yatch from the nil tax they pay?

Valid points Mancie, I wondered why this thread had 'died' a death, if VAT was on food as well, half the population would starve. In Sweden when I worked over there income tax was 50% accross the board yes for everyone, VAT was 33% on eveything including food, I think they called it MOMS, it was then up to each individual or family to claim back as much as they could, thus eliminating a lot of the paperwork jambutty was trying to find a way to do away with. I am aware this is a poor comparison because despite the size of Sweden London has a larger population. (I think)?

[WillowTheWhisp]

I can see trying to claim it back turning into a nightmare here - the way the wheels of beurocracy often grind to a halt with benefit payments and tax refunds often leaving people struggling I can forsee some real hardship.