November 10, 2017 at 2:46 pm #1556190
@jay – Ooops I need to think more perhaps. Just spotted perhaps a major goof.
If a man earns 40k and pays 25% tax you cannot drop his wage to 30k because he needs the extra 10k to pay the higher VAT. And if we can’t drop labour cost then we cant increase exports or keep jobs from going overseas.
What happens if we abolish VAT and increase taxation I wonder.
The background to my thinking is to start from a blank page to develop the optimum taxation system. The problem is taxation builds up with each government into a quagmire. Its like extending and modifying and old football stadium instead of knocking it down and starting afresh with a purpose designed new one.
Oh well looks like you’re fucked and just have to keep on paying your income tax. I’m alright Jack, I don’t pay it.November 10, 2017 at 3:10 pm #1556197
Mac – I personally don’t mind paying tax, how that tax is distributed is another issue. My biggest issue is the 40% tax bracket, at the moment is kicks in at 45K, which I think is far to low, then it cracks on to 45% at 150K, I think there should be either one rate even distributed, or 2 rates one for most and then one higher one for the really high earners.
The issue with the rate for even the really high earners is that they usually have a more expensive lifestyle, they are expected to wear designer suits, drive expensive cars, and host dinner parties within a nice house with expensive food and drink, so who is to say they have more spare money. Even if they do, why should they not be allowed to enjoy the fruits of their labour?November 10, 2017 at 3:25 pm #1556207
Pax – I admit I know next to bugger all about UK tax so perhaps should not be talking. The reason I do is to be an active contributor and add to debate, it’s not as if topics are overflowing with posts is it.
But surely the best system is incremental at different rates (correct me if its already like this) ie ..
First 10k tax free, next 10k 10%, next 20k 20%, next 40k 30% up to a maximum bracket or it could go on till its next 100m 80%.
But as I have said many times, focus should be more on developing ways for government to earn money and to reign in spending.November 10, 2017 at 3:42 pm #1556210
Mac – I still think that penalises people for being successful and therefore lowers the incentive, even if you took income tax out of the equation the higher earners still contribute more to the government coffers as the spend more so pay more in VAT, but at least they are getting something for it.
I do see what you are saying about removing Income tax completely and replacing with added VAT, the same argument has been running for years on road tax, as in why should someone doing 5 miles a week pay the same road tax as someone doing 1,000 miles a week, they have gone some way to rectifying this with the different car tax bands these days, not like the old 1 tax for all. The thing to try to do this with everything it is deciding the different levies on different products, who is to say what is a luxury and what isn’t, it was only this year that sanitary products got removed as a luxury item, fro VAT purposes, how mental is that 🙂November 10, 2017 at 4:52 pm #1556220
Pax – If we accept the concept those who have more pay more (percent) then you can view it as penalising success, but that is to an extent wordplay. The employed pay more than the unemployed, that penalises success!
If we exclude government savings and revenue from other sources to focus solely on income tax, yes we can tweak the rates and bands but I think there’s no way round taxing those who have a lot more for the simple reason that those who have little dont have it to pay it.
Really what would help a lot is nailing the super-rich who evade taxes through various means and even end up paying nothing.
I still think we need to decide our social principles first. The road tax example was a good example of how to apply the principle that those who use a resource more should pay proportionally more.
But its often more complex. The man in the rural area who has to travel more and has no public transport versus the man in London adding to congestion driving 5 miles when he could get a bus. I guess congestion charge tackles that but nonetheless the example shows how its complex if to be fair.
I think there needs to be several categories of goods for taxation purposes. Luxuries covers extravagance to petty indulgences. But I think it can be clear the reasons for different taxes. A cotton shirt or a silk shirt. An educational magazine or a dirty mag. A table wine or a vintage wine etc. A higher tax on a United season ticket than a City one because clearly one is quality and the other bog standard 🙂
PS – Yes there are always screw ups like the sanitary towel example but often they are spotted and corrected.November 13, 2017 at 9:06 am #1556737
Mac – I suppose you could put a higher tax on the United tickets as there are people that pay to be tortured 🙂November 13, 2017 at 9:22 am #1556751
Mac legislating between luxury and non luxury in the way you describe would be horrifically difficult e.g. what counts as an educational magazine?! Knitting, computing, crosswords?! Luxury vs non luxury shirt?! Are you going to legislate for every material? What about composite materials, 30% silk etc?
Be an absolute nightmare enforcing it and crippling to small businesses implementing it. The only winners….accountants.November 13, 2017 at 11:34 am #1556832
I don’t think it that difficult or contraversial in most cases. Of course you need levels, that’s to say not a binary luxury or non-luxury. The principle and practice of product categories is (used to be) established on import duties and handled composites. It can even be down to the seller, he can hardly sell as product as a luxury item if he has classified it as a basic item to the taxman. Does the newsagent have a problem which shelf to put the computing magazine on? No, it’s clearly “hobbies” for enthusiasts and is marketed as such.
You can add the tax on at the manufacturer level. If they are not capable of searching a database to find the suitable product tax code then tax is least of their problems.
You are making it seem more difficult that it is and we have a government system experienced in making distinctions. Look at what is tax deductible and what isn’t. Thousands of allowances.November 13, 2017 at 12:47 pm #1556860
I have processed vat returns for many companies and I know for a fact that would be an absolute nightmare.
The current VAT system is cumbersome enough, doing that would make completely out of control and disgusting. The revenue would need to treble (at least) their current staff levels to tackle the questions. You would literally need to legislate for every type of good!!!
The distortion to the markets would be ridiculous too. Lets go back to your example of shirts….so again what materials count as luxury?! Lets say it’s just silk…..how many silk producing businesses and employees have you just put out of business? What about shoes?! what type of shoes would you class as luxury?! High heels?! if so what length of heel? Again list of luxury vs non luxury materials? All trainor’s luxury? or just trainors with air bubbles? Velco vs laces? Dressy trainors vs functional (good luck legislating for that)? Football boots, they are not essential but surely by taxing them as luxury we are discouraging sport? Cars?! what counts as a luxury vs non luxury car?!
Who makes the decisions on these rates?! the revenue?! Their decisions could have far more wide reaching impact than simply tax collecting…it could have profound impact into all aspects of British life from culture, to the arts, to education and beyond.
It would be a political and economic nightmare!November 13, 2017 at 12:51 pm #1556864
I work in this field and whilst taxation in the country is not perfect, HMRC do not have any scope for wholesale changes to taxation policy. It would be a huge waste of taxpayers money to implement some of the suggestions on here. All the hypothetical conjecture is pie in the sky.
HMRC have cut their workforce massively and simply wouldn’t be able to enforce drastic changes to VAT liabilities. Most small businesses already have a huge burden of work with regard to tax and piling more pressure on would be catastrophic.November 13, 2017 at 1:00 pm #1556869
I think the biggest problem with the tax in this country is the Tax free value, and the level at which 40% tax kicks in doesn’t go up as fast as inflation, meaning in reality the tax free amount is getting smaller and the 40% comes in earlier, all stealthily putting more in the governments coffers, but I suppose this thread has probably shown we have not got a bad system, although it does annoy me, we have to pay so much more without any benefits for it.November 13, 2017 at 2:20 pm #1556915
Jay – Almost every type of product & service IS already subject to legislation eg Health & Safety. Every product should have a product code and it’s a fairly simple matter of grouping them (mostly already done) and deciding if its necessary, beneficial, basic, treat (ie minor indulgence) or extravagant luxury. Price or attributes can aid classification.
I work in ISO certification and can tell you there are classifications for everything. Its not as hard as you make out. Most is obvious from the product purpose. And we have software so its not that hard. Software should make accountants redundant – what do accountants do nowdays. Advise people how to cheat tax?
The decisions are made the same way they are now. There is input from relevant ministy, trade association etc. The infrastructure is already in place.
if you want to pick on a product eg shoes, cars, magazines. I’ll work through the process and classifications.November 13, 2017 at 2:20 pm #1556916
@dandy – I dont follow you. If we doubled HMRC budget could they handle it. If there is a classification for magazines and well split that to make a category for adult magazines. How difficult is it to add another code into a database with a different rate. How hard is it for publishers to know what the new rate is and amend their selling price accordingly.
And if for example magazines have 20% rate and an adult mag is 40%. How is VAT collection more difficult. I would think everything is computerised today. Would not the publisher know how many of each product it sold? Wouldn’t it be on their database. I’d have thought software could output Sales by Product, Revenue, Tax Due etc.November 13, 2017 at 2:30 pm #1556923
nine nine nineModerator
Dandy, if people have lots of time to waste as some seemingly have on here there’s no harm in it but as you rightly say though nothing said on here will be implemented.
Currently I’ve got the hump with HMRC as despite ensuring I’m on top of all my tax responsibilities and we liase regularly they’ve still hit me with a unwelcome bill for back tax despite how much I pay them every year.😠November 13, 2017 at 3:37 pm #1556949
people have lots of time to waste
Are discussions on TT are a waste of time? Perhaps they are, but that is the nature of sites like this.
as you rightly say though nothing said on here will be implemented.
You mean Parliament are not following what’s said on TT. You do surprise me. Seems like this is yet another topic you deem not worth discussing.
despite ensuring I’m on top of all my tax responsibilities ……. they’ve still hit me with a unwelcome bill for back tax despite how much I pay them every year
You can’t be on top if HMRC reckon you owe back taxes. Maybe if you didn’t waste your time here, you could find out why HMRC don’t share your opinion every year.November 13, 2017 at 6:03 pm #1556981
ok mac shoes…..lets go lolNovember 13, 2017 at 6:04 pm #1556982
Ps mac im an accountant and quite insulted by you commentNovember 13, 2017 at 6:55 pm #1556994
nine nine nineModerator
Macguffin, “every year”? It’s sorted now and hopefully a one off but thanks for your advice I’ve taken it on board after all you are an expert in respect of wasting time on here.😊November 14, 2017 at 3:30 am #1557074
@jay Belfast – Software makes much of the bookkeeping, arithmetic and reporting aspects of accounting redundant.
A major aspect of accounting is minimizing tax liability. They are like lawyers, their knowledge of the laws and loopholes is their stock in trade. Like lawyers they cannot directly encourage lawbreaking but they do so indirectly saying “IF you said your car was used for business THEN … “.
A key role of accountants is also to certify accounts however financial conflict of interest means there is pressure on them to not be independant. The Arthur Andersen scandal highlighted this.
I’m sorry if you feel offended but I don’t see the need to defend ones profession from criticism. My business (certification) is flawed for reasons similar to accounting.
Shoes it is then ………November 14, 2017 at 3:31 am #1557075
@nine nine nine – I misinterpreted your comment about every year. I get it now, you are suggesting that the amount of tax you’ve paid in the past should somehow exempt you or HMRC from making a mistake in the present or future.
As regards “wasting time” I’ve spoken about this with you before. It seems instead of actively contributing to topics, you try to bring them to an end by talking about how pointless they are. Forums are a leisure activity. Leisure and sport can be considered “pointless” and by extension this site.
Your petty insult is how topics degrade into squabbles. In contrast, my comment was intended to highlight your view seems to go against the site purpose ie encouraging participation and discussion.
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