Capital Gains Tax

I just thought I'd enjoy a bit of pedantry. Such fun, isn't it?

I'm not George Osbourne. I'm just guessing what he might do.

But there's VAT on excise tax too. So, to be pedantic, if cigarette tax is "incredibly regressive", doesn't that make VAT at least credibly regressive? :-)

Don't you have amount and percentage the wrong way round here? Plenty of rich people who smoke, smoke every bit as much as if not more than the poor, so they would spend a greater amount but a smaller percentage. Hence the poor may pay a smaller amount of cigarettes, but this typically represents a greater percentage of their income.

But it's the excise duty which makes it regressive, not the VAT. After all if there were no excise duty there'd be not VAT on excise duty ;-)

The poor actually smoke more (on average), so will pay a greater amount in cigarette tax, and therefore a far greater percentage. That's the point I was trying to make. No other tax is as regressive.

But there would still be VAT on the basic cost of cigarettes. Now that tobacco suppliers know how much people are prepared to pay for them, then if excise duty were abolished tomorrow, the basic price would rise so as to make the counter price stay the same.

I accept that, but averages don't really work well here. The *really* poor don't smoke because they can't afford to buy cigarettes. In fact, I'd go so far as to say that *by definition* if you smoke you can't be poor, because you can afford to throw away such a high proportion of your income on what, when all is said and done, is a luxury. I always cringe when I see beggars in the street lighting up. They deserve a kick up the backside, sponging off well-meaning benefactors, taking funds away from those who are more needy and more deserving.

Part of the purpose of the high excise duty on cigarettes is, or so I understand, to discourage smoking, and for the really poor this "discouragement" works by pricing the things out of their reach. Also the poor can't afford trips abroad to stock up on duty frees. So that leaves whatever black market in duty free or smuggled cigarettes, or turning to crime to fund the habit.

I'm just playing devil's advocate here. I don't really consider VAT to be regressive, it's just that it may seem so simply because it isn't progressive, like income tax.

But it'd be a trival part of the total VAT paid.

Would it now? By the same token, if VAT rises we shouldn't see any price prices?

It wouldn't, because someone would end up reducing prices to try to capture a greater market share, and the others would then have to follow suit. And if they don't, people would import and sell, just like they do now illegally to evade excise duty, except they'd be able to do it legally.

There's hardly anyone that poor. Even people on minimum state benefits find money for cigarettes if they really want to.

"Poor" is now defined as living on less than 60% of the median income. Bloody stupid definition, but that's what the government use (well the last government anyway). 60% of median income does get you some "luxuries".

Most beggars are beggars because they have a habit to feed - usually drugs or booze. Not because they can't afford to eat.

It *is* progressive. Most of the basics are VAT free, and stuff over the essentials for living are taxed. A bit like income tax, you get a allowance which should be enough to get you the most of the basics and anything over the allowance you get taxed on.

All of which Brown tried to reduce/abolish in his early years as chancellor, and only reversed policy because of the extreme pressure from other sources, particularly/saving/investment/finance pressure groups. Did you real think that wee tax addict and economic illiterate 'gave' you anything? 'Prudence' my arse.

Toom

In message , Toom Tabard writes

Rubbish! He introduced ISAs because the long TESSAs were just a tax break for those who had surplus money to put away and forget, as I did when I was working. He has also steadily increased the amount which can be invested over teh years.

ISAs are for everyone, either instant access for the less well off, especially the elderly, so that they could get at their money in emergency, or as a longer term investment where people like myself can tie up a proportion of their savings for a fixed term.

ISAs are the best thing since sliced bread!

Well the Tories were proposing to make *all* savings tax free for basic rate taxpayers, but I doubt they'll be able to afford now that "there's no money left"!

In message , Andy Pandy writes

That wouldn't be a great gift, with interest rates at the present level on liquid funds. :-)

Makes cash ISAs pretty useless too then.

In message , Andy Pandy writes

Not as great an advantage, I'll admit, mine are only earning 2.75%, but I found the Santander 3.2% for a lady friend, instant access too.