Comments on: VAT cuts and increases: having it both ways

By: Martin Audley

Martin Audley — Thu, 04 Dec 2008 22:51:36 +0000

There are two reasons why this is a tax bombshell and a shitty thing for the chancellor to be planning – and the second reason does make the up/down change asymmetrical, contrary to your argument:

Firstly: If the public know they are be taxed more in the future, then the present cut does no good whatsoever as they will instead start to save, to be ready for that future cost. They are not as stupid as the chancellor believes. Worse – the change damages small businesses who either suffer re-pricing and till reprogramming costs, or get damaged customer relations by admitting they cannot pass on the change.

Secondly: The VAT reduction is for a short, defined, period of time. But when VAT is raised, do you really believe it will be held high for only the same period? Not bleeding likely – it will stay up at 18 or 20% once there, as another stealth tax.

By: Philip

Philip — Thu, 27 Nov 2008 00:11:05 +0000

Holmes and Watson Perhaps Holmes and Yo-Yo would be more their style.

By: john b

john b — Wed, 26 Nov 2008 11:56:23 +0000

The extra NI only applies to income over the higher rate threshold, shirley?

By: Mike Power

Mike Power — Wed, 26 Nov 2008 08:50:14 +0000

You are absolutely right, of course. It’s pretty insignificant. Particularly compared to what Darling decided to go with instead – NI increases, rather than VAT.

I’ll take a VAT rise to 18.5% (with a net effect on prices of just +0.8%) over the changes in NI contributions any day.

Firstly, the VAT only applies if you chose to buy something whereas the NI increase is unavoidable. Secondly, our family would need to spend over £50k on chargeable products and services every year to pay the same amount in VAT as will be deducted in additional NI contributions.

Of course, it becomes even more irrelevant when you see people buying stuff on credit and being charged at 16%, 18% 22% for the privilege.