The big VAT lie from the Telegraph.

The definition of a regressive tax is usually based on the proportion of your income used up paying that tax, not the absolute amount of money paid on that tax. The rich have left-over income that they don't spend on VAT-able goods - instead, they do things like save or invest, and other things that don't incur VAT. As the amount of income they have spare to do other things like that goes up, the proportion of their income spent on VAT goes down.

e.g. if you and I spend exactly the same amount of money in a year, but I earn 1000 pounds more than you and put that in the bank, less of my money as a proportion of my income has gone on VAT. You, poorer by a thousand pounds, have spent more of your income on VAT, as a proportion. So, regressive, even though we both spent the same amount on VAT in absolute terms.

I don't think I've ever seen a chipoil display ex- and inc-VAT prices.

That's becasue you can't buy hot food ex-VAT.

Not sure why you think that about stamp duty. I'd say its a tax on whoever has to calculate it.

If I'm selling vatable goods then I work out what my minimum price must be and then have to add on VAT.

If I'm selling a house then I advertise it at what ever price I want to receive and the buyer has to account for the stamp duty.

My national insurance contributions are a tax on me while employers NI is a tax on the employer. We agree how much my employer is going to pay me. I "lose" my NI out of my salary while my employer pays extra for their contribution.

You can, obviously, decide to account for it in any way you like - all income tax and NI is a tax on the employee or the employer. But psychologically I'd say the tax is on whoever nominally loses the money.

Tim.

In message , Craven Moorhead writes

That's right. In these days of spreadsheets it's quite a simple matter to alter the VAT output tax formulae from =(total box)/17.5*100 to =(total box)/15.0*100). Thus the correct VAT is charged. [1]

Most complaints about the supposed complexities of VAT are unsubstantiated. Thirty years ago, when the VAT100 return ran into four A4 sides of an A3 sheet, the grumples were warranted, but to day it's a single side of an A4 sheet with relatively few boxes that include: total inputs; total outputs; how much you're paying; how much you're claiming back.

There are complications such as those I've experienced with confusion over VAT collected from other EU countries. HM C & E are still in the throes of fine-tuning the system. Latest ruling is that I can't charge VAT on intangibles -- metaphors such as the sale of territorial rights. If one can put it your mouth, it's vatable, otherwise not.

When Norman Lamont had to add 2.5 per cent to the standard rate of 15 per cent because treasury refused to bail out the government over the community tax shortfall, the transition was relatively smooth, as was the earlier abolition of the upper rate of 25 per cent.

In message , Andy Pandy writes

I'm no expert but I don't think so. VAT is a value added tax -- the retailer has added value to an item by stocking it etc. Everyone in the supply chain (assuming they're registered for VAT) passes a VAT output down the line and claims back any VAT charges involved until Mr Joe Public is lumbered with the VAT bill, with no one to claim it back from.

I was going to post something very similar - I think the confusion arises because at the very bottom income bracket the VAT is (probably) lower as a proportion of income than for some (reasonable spending) people earning more.

And VAT catches a surprising number of what I would call "essentials". So I don't think the very poor can really avoid it.

Tim.

Quite.

Yes, but one day that invested money will be spent, otherwise what's the point of it? And when it is spent it is more likely to incur VAT than a poor person's spending.

Which will be made up for when you spend that 1000. And if you don't, when you leave it in your will and your beneficiaries spend it.

People are now started coming to their senses about house prices, but until about 18 months ago house values tended to reflect the amount buyers could afford to pay. Stamp duty reduces buyers' ability to pay, so without stamp duty, house prices would likely have been correspondingly higher. So effectively a tax on the seller.

Do you really think retail prices work like that? Prices tend to be set based on what the market can stand, with a minimum level which reflects costs. In a highly competitive market where retailers have very small margins the above may be true, ie businesses will be able to cut prices by a bit more because of the VAT reduction, but otherwise it's unlikely to make much difference.

See above.

I wasn't talking "psychologically" I was talking "effectively", ie will the cost of everything go down by 2.5% [1] when the VAT rate is cut. I'd wager many things will stay the same, others will come down by more but would have done so anyway, but because the market is weaker than it was rather than the VAT cut.

If you gave extra money to poor people there would be no guarantee that they would spend that money on local businesses. They might spend it on 2nd hand tat or they might just waste it by turning the heating up or watching TV for longer.

But if you cut VAT, and the local businesses don't pass on that cut, what you get is more money for the businesses, which keeps them in business and keeps them employing people.

message

Foreign travel, foreign registered jet, houses, staff for same.

Certainly, some fairly well off people will have a second home, maybe in a foreign country.

Or you don't spend it on things that attract VAT.

Even if you assume they're going to spend the money eventually and pay the VAT, the "loan" from the taxman of about 15% of their savings will itself be earning them money. For someone with 117500 on deposit at 6% that's over a thousand pounds a year income from the VAT "loan".

Tim.

Thinking back about 30 years, McDonalds used to display two sets of prices because there was VAT on Eat in but not on Take Away.

Not especially. For example, someone rich is much more likely to be able to go abroad, or invest it in (for example) property. Spending in other countries doesn't attract VAT, and nor do property purchases - which don't have to be solely about investment, you could be buying a second home. VAT on property purchases has been suggested, though:

So they'll pay VAT abroad instead of here. Like foreigners paying VAT here while on holiday in the UK.

Even so their housing costs will typically be a lower proportion of their income than the housing costs of the "poor".

But the poor are likely to spend a greater proportion of their income on VAT free stuff, or low VAT stuff like domestic fuel.

Complete rubbish, you've not thought it through, have you? They'll be paying VAT on the now larger sum (including interest).

If you earmark 14.89% of their 117,500 savings as VAT, ie 100,000 is theirs and 17,500 is the VAT man's, then after interest is added they'd have 124,550, of which 106,000 is theirs and 18,550 is the VAT man's.

So their savings (having taken out the future VAT) have not benefitted at all from interest on the deferred VAT, the VAT man has benefitted from this.

Eh? How many countries don't charge VAT, or sales tax?

Rubbish. Someone on a low income is likely to spend at least half their income on VAT free stuff (like most food, rent, second hand goods) or low VAT stuff (domestic fuel). It's unlikely many average to high income people would spend anywhere near the same proportion on VAT free stuff.

No, true. That's why VAT is a regressive tax - which it is, to everyone except you.

Many people on low incomes actually spend much of their money on food that attracts VAT.

For example, someone who can afford to spend the time preparing a meal from scratch will often be able to take advantage of many more zero-rated items, and many people today don't have many cooking skills. There are regular news reports discussing such things, all the time, from a variety of sources.

As has already been pointed out, huge house purchases don't attract VAT, and can consume vast quantities of money.

In message , Edster writes

Oddly, Lidl's itemised print outs show the amount of VAT payable on certain goods and even total the amount of VAT. The range of foodstuffs that now attract VAT is surprising.

In message , Miss Baltimore Crabs writes

Many years ago our local comprehensive ripped out its cooking class appliances because teaching cookery was deemed a waste of money in today's modern, caring society. Now they've been allocated a budget to put them back.

Pret still does that.