Tuesday, 26 June 2012

Whither the taxes?

Government borrowing for May is at record levels. Instead of a drop we are seeing a big increase over last year, from £15.2 billion to 17.9 billion. Simply put, although the austerity drive is seeking to curb the growth of the Government, the weak economy is reducing tax receipts at an even faster rate.

We are running very hard to go nowhere at all it seems. The only good news is that the continuing low gilt rates means that higher borrowing can be absorbed more easily than expected; but as the Government's headline goal is to shrink the deficit, this will be seen as failure.

Not that even more spending is going to help boosts tax receipts. Hopefully this goose is cooked once and for all. More Government spending is not helping boost the short-term economy substantially and payments made to pensions and benefits are a drain. An argument should be made for more capital investment as this should stimulate the economy - but with such opposition to HS2 and Heathrow expansion the Government is scared of large infrastructure programmes.

So how do we raise tax receipts - the contrarian view would be to lower taxes. Less taxes means more spending which in turn stimulates the economy and also increases consumption taxes like VAT. With such as high tax burden coupled with no return on savings people are not spending but trying to save and deleverage. Lower taxes would help to speed up this process and so bring forward eventual economic recovery. We need an emergency budget to start making some radical changes and probably a new Chancellor too.


Jan said...

As I said yesterday we need to stop pussy-footing around and just get on with it. All this jaw-jawing which David Cameron seems to love makes me want to scream.

There are many bits of government which could be scrapped entirely saving on admin and unnecessary public sector jobs eg the winter fuel dept of DWP as I proposed yesterday. So cutting government spending on the one hand.

On the other obviously the huge tax avoidance schemes need curtailing and from the latest discussions it would seem that the government are beginning to look at this. However they have been exceedingly slow. This could have been started on day 1 of the present government.

Since it would seem that the richest 1% are the most likely to be getting away with paying the least amount of tax percentagewise then how about a luxury VAT rate on high end cars/yachts/clothes/cosmetic medical procedures etc which could be introduced virtually overnight and would be less avoidable than income tax?

Already I can hear howls of outrage but if the rich won't pay their fair share.....

SumoKing said...

Jeebus tittyfucking kerist!

VAT is not a consumption tax, the bluddy thing ends up borne 2/3s by the producer/maufacturer, it's closer to corporate income tax than corporation tax is!

Tax simplification first.

Income taxes and VAT slashed next.

Land Value Tax, after that, Jimmy Carr can't hide his mansion by sticking it in the channel islands but he can minimise his tax by moving to some arse end of the world place like Luton.

You could even do a straight swap with the 50p/45p rate in london on the basis that it hits london hardest and lvt would do the same.

andrew said...

I would humbly suggest that we tax people who do not vote.
Preferably people who cannot vote even if they wanted to.

Like Foreigners.

If you go on hol to france and drive on the motorways to the SW, you may well end up paying about 300EUR to the frencg govt.

Every truck that goes from Germany to Spain pays this and more on every trip.


1 A hefty lorry fee that really pays for the damage heavy loads do to the roads. Twin this with a rebate to uk based trucking firms.

2 A mansion tax on houses over 1m that is (say) 5% of it's assessed value every year. Cut the higher rate from 45% to 40%

There is no such thing as a new idea. I am sure that we can learn from our continental partners.

We tax what is earnt and what is spent. We do not seem to be taxing what is not spent very much at the moment.

Jim said...


Yeah, right, cos the megawealthy just have to buy their cars/yachts/clothes/cosmetic medical procedures in the UK don't they? I mean none of then might decide 'You know what I don't fancy paying 50% VAT on my new Bentley, I'll buy one in Monaco where one of my other 10 houses is' would they?

How many more times has it got to be pointed out that the rich pay vastly more tax than most people earn in a year? That without the taxes the megawealthy already pay everyone else would have even higher taxes to pay, and less revenues to spend as well no doubt.

I wish everyone who earned more than £250K would leave the country. Then we'd see exactly what a huge debt the rest of us owe them.

CityUnslicker said...

Jim your wish is coming true, no matter what people say or get annoyed about. the tax take is dropping as people decide either not to earn it or to do so elsewhere.

Sumo - LVT, jesus wept, a communist.

No we can't tax assets as they don't grow in value. People may own a nice home without having 50k a year spare income to pay an increased rates bill.

VAT is a consumption tax, I fear you have been reading Mr Wadsworth too much. The vast majority of VAt is paid by the end user - most businesses reclaim it (pointless merry-go-round, but that's another sotry). If you don't buy, you don'ty pay.

Sebastian Weetabix said...

LVT. Jeez. Another fucking commie trying to turn us into serfs. Fuck off.

The problem with this government is: there is no fucking austerity. They are pissing more money away this month than last month, more money this year than last year. There are no cuts. Even the slashing of defence spending is just paying for more foreign aid (or rather new Land Cruisers for kleptocrats and lady bountiful slumming it as an aid worker, it never has and never will do any fucking good), more 5-a-day cottaging outreach co-ordinators, more welfare for the workshy and even worse untold billions on supporting the Euro both directly and through the IMF. "No one has ever lost money lending to the IMF" is the cry. Well, useless Gideon is going to be the first to prove that maxim wrong.

This country has some serious problems. In no particular order we earn too little, we spend too much, we have a shitty and declining education system, but worst of all we are not sovereign. Here is the Weetabix plan for National Renewal.
1. No more bailouts for banks. Spurn unsecured debts. They are the shareholders/creditors problem, not the taxpayer's. If they fail, they fail. Get the poison out of the system.
2. Break up RBS and turn it into a proper working bank again.
3. No more money for the EU. Organisations with fraudulent accounts run by kleptocrats can fuck off. Organise a referendum on leaving ASAP.
4. Simplify the tax code. One rate: all income taxed at 25%. Don't care if it's wages/dividends/rent or whatever. no exemptions, no exceptions, no subsidies to distort the market. Abolish NI as it is just a tax on employment. Corporation tax at 15%. Once we're out of the EU we can dump VAT as well. It's a pain in the arse for business to administer.
5. Reduce government spending by 10%+ in actual cash terms, not fictitious cuts in the rate of future spending. We could start with a real bonfire of quangos, followed by a 20% cut in Doctor's pay. Since they hate the profit motive in the NHS I am sure they will do their bit for the social weal. If they don't want to, the late Dave Allen's view that they are all drunken necrophiliacs may gain wider support.

And in the face of our national difficulties what are these fucking Frankfurt School Marxists who call themselves 'Conservative' doing? Drawing up a buggers charter so nancy boys can "marry". Fucking hell. We should be stringing our 'leaders' up with piano wire.

Lord Blagger said...


Spending up - lots. Can't even blame the number of unemployed for that unless they are getting banking salaries at pre-crash levels there

Tax revenues down.

Borrowing up - 150 bn

Other debts - another 350 bn (you do want your pension don't you?)

Dick the Prick said...

The lack of anything approaching cuts is both economically and politically stupid. They had a chance to do some seriously good work but instead have just kicked it down the line in an attempt to shore up votes which were never theirs in the first place.

The 50% tax rate to 45% was stoopid, either 50 or 40 but not some half arsed figure plucked out of nowhere - vote loser.

The lack of a freeze on public sector employment unless approved by some minister has just left officers in charge of their own departments and makes ministers look even smaller than we all know they are - stupid.

Cameron ditching CCHQ and getting the cabinet office to run policy planning is just trecherous at worst or juvenile at a push.

And where the fuck these policy announcements of preventing housing benefit to under 25s come from and HoL reform etc just beggars belief. Sure, they have value but only after some bloody work has been done and not instead of effort.

If I had any money that could be siphoned off into avoidance schemes i'd be doing it out of principle as these chumps are just pathetic. At least Labour supported their core and increased them through immigration but it seems that the Tory strategy toward their natural voters is both taken for granted yet held in contempt.

Budgie said...

Every business, which is VAT registered like mine, gets VAT back in an endless, meaningless merry-go-round where we pay to HMRC only what we collect from others. Only the final consumer pays VAT. So it is very much a consumption tax.

I agree with CU, Sebastian Weetabix and Dick the Prick. No real cuts compounded by stunning government inefficiency.

Anonymous said...

Government spending up 7%. What austerity?

Jim said...

To be fair to Mark Wadsworth who I have had considerable to and fro with about whether VAT is a consumption tax or a tax on business (he contends it is a tax on turnover) he does have something of a point. Consumers do not pay the whole burden of VAT. There is a spread of incidence from consumers to business that varies depending on the product. It depends on the demand and price elasticities.

For example think of restaurants - they charge VAT on food they sell. So if VAT were taken off cooked food sales, yes prices would fall, and consumers would benefit. But equally as prices fell, sales would rise, as people could afford to eat out more. So profits of restaurants would rise. Thus showing that the incidence of VAT falls not only on consumers but also businesses. VAT on cigarettes for example falls largely on the consumer, whereas VAT on restaurant meals is probably a much more even split.

hovis said...

Sebastian Weetabix youhave my vote - Dave Allen forgotten too quickly and oh so funny and wise (and right)

Benji said...

Vat is a tax on turnover.
This is demonstrated very clearly when a business from non vat to vat paying status.

If a business needs a 100% ish mark up it takes cost price {50p} and x2 multiplier and adds on top the VAT paid so far. =£1.10

.50p supplier
.10p taxman
.50p profit
.consumer pays £1.10

Once company enters the vat world the same item/price has lost margin.
.50 supplier
.10p tax paid & claimed back.
.48p profit
.12p tax {22p less the 10p back}
.consumer pays £1.10

If the business wants its 2p back it has to charge £1.13

SumoKing said...

Sumo - LVT, jesus wept, a communist.

Either all taxes are communist or no taxes are communist.

You can't reaosnably tax the view that slapping 30,40,50% of tax on your labour/efforts/production is the heart of a caring capitalist economy

but slapping a tax on how much benefit you get from being near to the shops, having lots of cops on the street and money poured into the troughing local schools is the very spirit of lenin reaching out to drag all good tories boys down into the depths of deepest darkest socialism

That does not make any sense.

Look, this is Chewbacca. Chewbacca is a wookie from the planet Kashyyk. But Chewbacca lives on Endor, now think about that, that does not make sense!

phil5 said...

Sebastian Weetabix for PM!

Or in other words I agree with pretty much everything you say, including the debt repudiation aka jubilee as the first step.

Budgie said...

Businesses either collect more VAT from customers than is paid to suppliers, or they get a refund from HMRC. Clearly some people here aren't aware of that. For B2B VAT has no effect.

Indeed businesses (B2B) never quote prices with VAT because VAT simply does not matter. Only at the end of the chain (the consumer and non-registered (small) businesses) does VAT get paid but not refunded. VAT is purchase tax with added surveillance.