Tax policies in the run up to the General Election

[najaB]

Right. So it's basically something that the Government couldn't do before Brexit. Brexit gave us the freedom to make these kinds of decisions, and it's arguable that in this particular case that Government chose badly. But there was nothing about Brexit that compelled the Government to do that, and it's very plausible that a different Government would have chosen differently, so it seems a bit of a stretch to blame Brexit in this case.

Indeed. I'm not blaming the Brexit that we could have had, just the Brexit that we got.

 

[class ep-09]

Are you saying that, because the Tories happen on some occasions to have possibly made bad decisions, the UK Government shouldn't ever be allowed the ability to make decisions on those matters?

On some occasions ?? Possibly ??

Do you live on this planet ?

As far as the last 13 years show , this government ( tories ) made pretty much only bad decisions and more often, than anyone can remember .

 

[SargeNpton]

As far as the last 13 years show , this government ( tories ) made pretty much only bad decisions and more often, than anyone can remember .

Every government makes bad decisions eventually. Which is why they get voted out of office.

 

[Wynd]

Every government makes bad decisions eventually. Which is why they get voted out of office.

Yes, but the Treasury make bad decisions decade on decade, and we cant as a people dislodge them or compel them to run our economy in a manner even approaching competently.

QE, now a blank cheque, despite reaping £124B.
Stagnant wages and falling living standards.
Woeful investment.
Mismanagement of the Money supply and national debt.
Woeful taxation management.
Austerity orthodoxy that is misplaced and counter-productive.

Its a near endless list.

 

[edwin_m]

Every government makes bad decisions eventually. Which is why they get voted out of office.

This one seems to have made an unusually large number of very bad decisions but is only now looking like having to pay for them. They only got away with it in 2019 because they conned a large part of the public on Brexit, and because the Corbyn alternative looked even worse to a lot of people.

It's probably easier to list the good decisions this government has made. Since 2019 I can only really think of Covid furlough and vaccinations and supporting Ukraine, and I can't think of much before that, but I'm probably biased. The Windsor agreement was also a good decision, but that's just reversing some of the catastrophic decisions made on Brexit so I don't count it.

 

[class ep-09]

This one seems to have made an unusually large number of very bad decisions but is only now looking like having to pay for them. They only got away with it in 2019 because they conned a large part of the public on Brexit, and because the Corbyn alternative looked even worse to a lot of people.

It's probably easier to list the good decisions this government has made. Since 2019 I can only really think of Covid furlough and vaccinations and supporting Ukraine, and I can't think of much before that, but I'm probably biased. The Windsor agreement was also a good decision, but that's just reversing some of the catastrophic decisions made on Brexit so I don't count it.

I’d say furlough and vaccination were necessities that every government had to make in one form or another .

I would not say these were good decisions just something they had to do .

I’d give them help to Ukraine but again , what would be other option ?

 

[E27007]

I still cannot figure out why they removed VAT-free retail sales to tourists. It's made the UK a bit of an outlier.

The Chancellor needs all the money he can collect.
We should not be encouraging the market for Veblen goods.

 

[DynamicSpirit]

On some occasions ?? Possibly ??

I'm actually undecided about the VAT thing. There's obviously a balance between wanting to raise revenue and not wanting to deter business, and I feel I don't really know enough to judge where the balance lies in this instance. One thing I would remark on though: It seems to me that the people attacking the Tories over this issue don't seem, based on other posts, to be the kind of people whom I'd expect to be supporting tax reductions for (often, wealthy) foreign tourists. So I wonder the chance to use it to slag off Brexit is biasing some people

Do you live on this planet ?

Yes, I just don't view everything through Tories/Brexit=must-be-bad -tinted spectacles.

 

[Enthusiast]

On some occasions ?? Possibly ??

Do you live on this planet ?

As far as the last 13 years show , this government ( tories ) made pretty much only bad decisions and more often, than anyone can remember .

But the same question still applies. You seem to be suggesting that because the elected government of the UK made decisions with which you do not agree (let's for the sake of argument call them "bad") then the UK government should be constrained or regulated by a supra-national organisation whose remit is to satisfy the needs and requirements of a large number of very disparate nations. But what if the latest government made predominantly "good" decisions (i.e. those with which you agree)? Would you still like to see that oversight and regulation maintained, even if it meant that some of those good decisions could not be implemented? As it happens, I think the Tories have made some appalling decisions in their latest term of office - decisions that have a far greater impact on the people of the UK than whether a tourist can buy some goods without paying VAT. And I voted for them on each and every occasion I was asked to.

This strikes at the fundamental issue of Brexit: it's not about who settles here and who doesn't; it's not about what shape bananas must be in order to be sold; it's not about which items attract VAT, or which don't. It's about who is empowered to make those decisions. If you believe you need the protection from the follies of an elected government then an EU country might well be agreeable to you. Unfortunately, if you cannot trust your elected government to such a degree that you need that protection, the UK is not the place to be.

 

[jon0844]

People don't have to be wealthy to buy goods they're entitled to buy duty free, but I would imagine a lot of people wouldn't bother for small purchases but might for big ones.

However, I see no reason not to offer duty free sales - although my memories of doing this suggest it was a major PITA to sort out when leaving the country (time wise). It was almost certainly open to abuse too.

 

[najaB]

It seems to me that the people attacking the Tories over this issue don't seem, based on other posts, to be the kind of people whom I'd expect to be supporting tax reductions for (often, wealthy) foreign tourists. So I wonder the chance to use it to slag off Brexit is biasing some people.

Given that those wealthy people are, as you say, foreign the majority of people can see that it's better to get some tax revenue from them (through spend while they are here) rather than none at all (if they holiday somewhere else).

 

[Sm5]

I still cannot figure out why they removed VAT-free retail sales to tourists. It's made the UK a bit of an outlier.

US doesnt offer your tax back, unless its in the Airport exit lounge.

Those who spend on Londons high street dont care about tax back, the penny pinchers stopped coming anyway, as soon as they needed to buy a passport.

I actually think VAT should rise to 25-30% and reduce other “avoidable“ taxes accordingly… if corporation tax went low, there would be no hiding profits behind investments overseas, and booking deals off shore for tax avoidance.indeed the reverse may happen and we see more profits on-shored. it certainly worked for the Irish for two decades.

 

[edwin_m]

US doesnt offer your tax back, unless its in the Airport exit lounge.

Those who spend on Londons high street dont care about tax back, the penny pinchers stopped coming anyway, as soon as they needed to buy a passport.

I actually think VAT should rise to 25-30% and reduce other “avoidable“ taxes accordingly… if corporation tax went low, there would be no hiding profits behind investments overseas, and booking deals off shore for tax avoidance.indeed the reverse may happen and we see more profits on-shored. it certainly worked for the Irish for two decades.

Everyone ends up paying VAT, despite very limited exemption for essential items, unlike income tax where those on very low incomes pay little or none. Increasing it means the poorest will be paying more.

 

[najaB]

Everyone ends up paying VAT, despite very limited exemption for essential items, unlike income tax where those on very low incomes pay little or none. Increasing it means the poorest will be paying more.

The only way around that would be to have more essentials either zero-rated or exempt, but then comes the question of what is an essential vs what is a luxury? A loaf of bread that has to last the week is an essential, a fourth loaf because Quentin doesn't like the seeded loaf that Charlotte loves isn't.

 

[DynamicSpirit]

Everyone ends up paying VAT, despite very limited exemption for essential items, unlike income tax where those on very low incomes pay little or none. Increasing it means the poorest will be paying more.

Kinda, but set against that, you'd normally assess what counts as a low income based on the prices of goods, so if VAT was higher, then people on low incomes would probably be getting more money via Universal credit etc., so it would balance out. I guess the advantages of VAT are (1) it allows you to charge zero rates for different goods, so you can in principle use it to encourage/discourage consumption of certain things, (2) it helps a bit with tax evasion: If someone is paying no income tax because they've lied about their income and haven't yet been caught, then at least they will still be paying VAT on stuff they buy. The disadvantage is it's much more complicated to collect, and for businesses to work with.

Personally I'd prefer for VAT to be lower and more tax to be collected via income tax, but I don't think it's a set-in-stone thing and I can see why other people would feel the opposite.

 

[Tetchytyke]

it helps a bit with tax evasion: If someone is paying no income tax because they've lied about their income and haven't yet been caught, then at least they will still be paying VAT on stuff they buy. The disadvantage is it's much more complicated to collect, and for businesses to work with.

It’s swings and roundabouts in relation to tax evasion, given the rates of VAT evasion (both deliberate and accidental) as well as legitimate VAT mitigation/avoidance.

As an example, look at Lewis Hamilton and his private jet, or the recruitment industry’s use of Filipino shell companies.

 

[Sm5]

Personally I'd prefer for VAT to be lower and more tax to be collected via income tax, but I don't think it's a set-in-stone thing and I can see why other people would feel the opposite.

removing personal allowance would indeed increase the tax take.

its already removed for everyone earning over £100k, effectively meaning a 60% tax on incomes between £100-125k, and 50% there after, plus NI (12% then 2%).

Taking more than 70% of someones income for being successful is hardly a reward for being successful and encourages people to either not be successful (lazy), leave the country or more likely… employers to not offer those salaries Leading to lower incomes for everyone.

The numbers earning over £100k proportionately is very small and shrinks further the higher you go Reducing the tax take. Further those on higher incomes have more avenue’s to reduce tax.

Income tax just takes money out of the system.
If people have it, they can spend it, which means VAT can still be recovered each time the cash is recycled.

if spending on imports is regulated, and a system where all purchases are onshore booked, not off shore booked it brings the tax take home.

People don't have to be wealthy to buy goods they're entitled to buy duty free, but I would imagine a lot of people wouldn't bother for small purchases but might for big ones.

However, I see no reason not to offer duty free sales - although my memories of doing this suggest it was a major PITA to sort out when leaving the country (time wise). It was almost certainly open to abuse too.

I remember regularly seeing people queuing at LHR T3 blatantly going on holiday, getting their reciepts in and stamped to claim back VAT claiming they were exporting gifts etc….

I bet many came back in suitcases.

Very few Ordinary brits have reason to duty free shop on exports from the UK.
The import allowance is too generous imo, theres no reason for any personal allowance.

Wealthy tourists will buy whatever they want, regardless vat. General tourists wont spend big.
Theres a big protest about tourist tax on hotels, personally I see nothing wrong with it.

 

[Richard Scott]

removing personal allowance would indeed increase the tax take.

its already removed for everyone earning over £100k, effectively meaning a 60% tax on incomes between £100-125k, and 50% there after, plus NI (12% then 2%).

Taking more than 70% of someones income for being successful is hardly a reward for being successful and encourages people to either not be successful (lazy), leave the country or more likely… employers to not offer those salaries Leading to lower incomes for everyone.

The numbers earning over £100k proportionately is very small and shrinks further the higher you go Reducing the tax take. Further those on higher incomes have more avenue’s to reduce tax.

Income tax just takes money out of the system.
If people have it, they can spend it, which means VAT can still be recovered each time the cash is recycled.

if spending on imports is regulated, and a system where all purchases are onshore booked, not off shore booked it brings the tax take home.


I remember regularly seeing people queuing at LHR T3 blatantly going on holiday, getting their reciepts in and stamped to claim back VAT claiming they were exporting gifts etc….

I bet many came back in suitcases.

Very few Ordinary brits have reason to duty free shop on exports from the UK.
The import allowance is too generous imo, theres no reason for any personal allowance.

Wealthy tourists will buy whatever they want, regardless vat. General tourists wont spend big.
Theres a big protest about tourist tax on hotels, personally I see nothing wrong with it.

I agree re. tourist tax. Most other countries do it so why don't we? Would it really harm tourist industry? I really doubt it.

 

[Yew]

I remember regularly seeing people queuing at LHR T3 blatantly going on holiday, getting their reciepts in and stamped to claim back VAT claiming they were exporting gifts etc….

Do you have any evidence to back up these assertions?

 

[najaB]

If people have it, they can spend it, which means VAT can still be recovered each time the cash is recycled.

Yet there are people today with fat bank balances and/or investment portfolios. Remind me, how much VAT is charged on stock transactions?

 

[DynamicSpirit]

Yet there are people today with fat bank balances and/or investment portfolios. Remind me, how much VAT is charged on stock transactions?

What's the added value on a stock transaction?

 

[Wynd]

Sales tax on stock transactions would only thin the markets. Stocks can change hands millions of times a day, as part of the price discovery mechanism. Add friction and you lose part of the fidelity of that mechanism.

That being said, there is an argument for graduated VAT per earnings tax rate.

Why does a nurse pay the same VAT on food and Fuel and someone who has a 6 figure income....? That's truly indefensible.

 

[JamesT]

Yet there are people today with fat bank balances and/or investment portfolios. Remind me, how much VAT is charged on stock transactions?

It’s called Stamp Duty and is 0.5%.
If the investments are outside an ISA there will also be Capital Gains Tax.

 

[ainsworth74]

Sales tax on stock transactions would only thin the markets. Stocks can change hands millions of times a day, as part of the price discovery mechanism. Add friction and you lose part of the fidelity of that mechanism.

Though is that necessarily a good thing? Stocks changing hands millions of times per day? The level of automation in the stock market actually seems like it might something to be concerned about as increasingly do the traders really know what's going on with their market? Adding a small amount of friction to slow the number of trades might not be a bad thing in the grand scheme. After all anyone, anything, which is actually trying to invest would only pay a miniscule amount as presumably they're not going to be choping and changing what's held millions of times a day!

I will confess the stock market is not an area I have that much experience in (I dabble for a bit of fun with a handful of shares through one of the apps but that's just on a "ooh the line goes up/down" sort of basis rather than a scheme to actually make money ) but it doesn't seem healthy at the moment the level of automation and the level of transactions which don't seem to involve any human in the loop!

 

[najaB]

What's the added value on a stock transaction?

Exactly. The idea that lowering income tax on the wealthy results in a higher overall tax take has been proven completely false a dozen or more times.

Yet we still have people espousing trickle-down economics.

 

[JamesT]

Though is that necessarily a good thing? Stocks changing hands millions of times per day? The level of automation in the stock market actually seems like it might something to be concerned about as increasingly do the traders really know what's going on with their market? Adding a small amount of friction to slow the number of trades might not be a bad thing in the grand scheme. After all anyone, anything, which is actually trying to invest would only pay a miniscule amount as presumably they're not going to be choping and changing what's held millions of times a day!

I will confess the stock market is not an area I have that much experience in (I dabble for a bit of fun with a handful of shares through one of the apps but that's just on a "ooh the line goes up/down" sort of basis rather than a scheme to actually make money ) but it doesn't seem healthy at the moment the level of automation and the level of transactions which don't seem to involve any human in the loop!

The poster child for the adverse effects of a financial transaction tax is Sweden in the 80s. https://en.wikipedia.org/wiki/Swedish_financial_transaction_tax
They pretty much destroyed their stock market by introducing one.

 

[Wynd]

Though is that necessarily a good thing? Stocks changing hands millions of times per day? The level of automation in the stock market actually seems like it might something to be concerned about as increasingly do the traders really know what's going on with their market? Adding a small amount of friction to slow the number of trades might not be a bad thing in the grand scheme. After all anyone, anything, which is actually trying to invest would only pay a miniscule amount as presumably they're not going to be choping and changing what's held millions of times a day!

I will confess the stock market is not an area I have that much experience in (I dabble for a bit of fun with a handful of shares through one of the apps but that's just on a "ooh the line goes up/down" sort of basis rather than a scheme to actually make money ) but it doesn't seem healthy at the moment the level of automation and the level of transactions which don't seem to involve any human in the loop!

Good or bad, its the state of play. Algorithmic trading isn't going away. Its a key part of price discovery, which is fundamentally important to markets.

Adding VAT would do one thing, discourage listings on UK markets, which are already struggling badly to compete.

The loss in public revenue from finance employment would only compound the damage Brexit has already inflicted in that space.

The only way out of this mess is to grow the economy, which is going to be challenging when trading links have been so badly damaged.

A doom loop of falling investment begetting lower growth driving lower investment appears to be taking hold, and someone has to break that soon.

Like it or not, small boats and 2p tax cuts aren't even close to the mark, but a mere distraction.

Has anyone looked at how much debt interests the UK is going to pay this year? Its staggering.

 

[ainsworth74]

The poster child for the adverse effects of a financial transaction tax is Sweden in the 80s. https://en.wikipedia.org/wiki/Swedish_financial_transaction_tax
They pretty much destroyed their stock market by introducing one.

I shall have a read thank you

 

[Wynd]

The poster child for the adverse effects of a financial transaction tax is Sweden in the 80s. https://en.wikipedia.org/wiki/Swedish_financial_transaction_tax
They pretty much destroyed their stock market by introducing one.

Point proven.

During the first week of the tax, the volume of bond trading fell by 85%, even though the tax rate on five-year bonds was only 0.003%. The volume of futures trading fell by 98% and the options trading market disappeared.[1] 60% of the trading volume of the eleven most actively traded Swedish share classes moved to the UK after the announcement in 1986 that the tax rate would double. 30% of all Swedish equity trading moved offshore. By 1990, more than 50% of all Swedish trading had moved to London. Foreign investors reacted to the tax by moving their trading offshore while domestic investors reacted by reducing the number of their equity trades.[2] According to Anders Borg who served as finance minister in the Swedish government from 2006 to 2014, "between 90%-99% of traders in bonds, equities and derivatives moved out of Stockholm to London."[3]

 

[DynamicSpirit]

Exactly. The idea that lowering income tax on the wealthy results in a higher overall tax take has been proven completely false a dozen or more times.

Yet we still have people espousing trickle-down economics.

Eh? I don't see any connection between my comment and either the Laffer curve or trickle-down economics? You queried why there is no VAT on stock transactions. I merely pointed out via a rhetorical question that stock transactions don't in themselves add consumer value - so there's no reason why value added tax should apply to them. If a stock transaction results in a profit, that will be captured by capital gains tax (if the profit goes to an individual) or corporation tax (if it's a business entity).