The big VAT lie from the Telegraph.

Exactly. But I've heard the same sentiments on the radio. Probably government press release/leak.

It'll make little difference, except as a push towards deflation... which I don't see as a bad thing ... and the greenies should be all for it.

What % increase in benefits would cost the treatusry the same as a

2.5% reduction in VAT?

Robert

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What makes you think that VAT is only applied to luxury items?

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On rereading I'm not sure that's what you said - sorry. But it bugs me that so many normal items carry the full VAT rate, not just luxuries. (eg I never understood why there's VAT on healthy orange juice but not sugar-laden orange squash or "juicing oranges" that are only for squeezing).

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It's not on food. That's all I can afford.

I was surprised there was no increase to working dole (whatever that's called these days) for people stupid enough to take a job that pays less than what they would have got if they hadn't bothered. If the idea is to get people to spend more, those would be the people most likely to spend any extra money they had.

It seems to me that though that's not *exactly* what he said, it is more or less the thrust of his argument. He implies that a larger proportion of a poor person's spending is on goods which carry no VAT.

However, luxuries aren't really the issue, nor are "the rich". This is because the seriously rich are so few in number that despite their individual spending being high, their combined spending amounts only to a relatively insignificant share of overall spending. We need to look at the folks in the middle. Many of them are affected by the squeeze that they will curtail or postpone spending on luxuries, so the market in luxuries can be expected to shrivel more than that in basics.

That depends on how much more likely they are to spend the money quickly. If middle-class people will just put the money in the bank, it doesn't matter how much of their spending is on VATable goods.

-- Richard

Indeed; takeaways, to quote one example, are VAT-able.............how many of your chinese/indian/english takeaways are going to go to the hassle of reprinting all their menus?

None. No more, or less.

So the price paid by Joe Public is the same; no VAT benefit there.

Can't be. It is a legal requirement for the VAT to be correctly charged or there will be deep piles of s**te all round.

VAT will be correctly charged. There just won't be a change in the prices.

I don't think you understand how VAT works.

Date 30 Nov 08 1 Dec 08

Price including VAT 117.50 117.50

VAT 17.50 15.33

Price before VAT 100.00 102.17

0/10 for you; must try harder.

My chicken curry with fried rice is currently priced at £6.00.

That's £5.11 to Mr Wong and £0.89 to Mr Darling (for doing f*ck all incidentally).

After these proposals go through, the split is £5.22 to Mr Wong, £0.78 to Mr Darling.

The cost to me either way is the same.

That's whyit is better to increase benefits because

1) People on benefits are likely to spend it immediately, indeed if you are on benefits you get penalised if you save, anything above 6,000 and they cut your benefits!! 2) People in work are more likely to spend if benefits are more generous because fear of having nothing to live on is reduced.

This is the perfect solution to the currrent crisis but it will never be implemented because well most people are too mean for their own good, instead the government will make out they are just idlers who don't want job. No doubt they will be trotting out ther are still 250,000 vacancies as hundreds of thousands are dumped on the scrapheap every month, and the depression gets deeper and deeper in a vicious spiral, no doubt with more calls for benefit cuts.

Should be a good laugh.

Expensive takeaways, somewhat paradoxically.

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It seems to be a commonly quoted misconception that VAT is regressive. More often by the left-wing media than the right-wing media. I've yet to hear anyone justify how exactly VAT is regressive - it clearly is not.

True, but Mr. Wong now has more money to spend.

So the end result to Joe Public is exactly the same which was the point .

Yup - VAT is really a tax on the retailer not a tax on the customer. Just like stamp duty always was a tax on the seller rather than the buyer.

It's not, which is why a cut in it *is*. The poor arent likely to see any more change out of a fiver when they buy something currently at £4.99; OTOH someone buying a car for £49,999 *will* see a price cut.