Guest sibon Posted June 24, 2012 Share Posted June 24, 2012 You are assuming the point of taxation is on your earnings, which is incorrect, not on what you spend which is where VAT is levied. I was. That seems to be a reasonable basis for comparison. Indeed, it is the basis for this part of your last post, is it not? The VAT rate would not decrease for the wealthy compared to the poor for the simple reason the rich spend more money. Link to comment Share on other sites More sharing options...
WeX Posted June 24, 2012 Share Posted June 24, 2012 I was. That seems to be a reasonable basis for comparison. Indeed, it is the basis for this part of your last post, is it not? No, I have not made the same assumptions you have and this is where your calculations go wrong. You also fail to factor in the three different VAT rates we have and their impact on the purchases the two groups discussed. When I talk about the rate, I am speaking of when it is levied. Your assumptions and resultant conclusions are far too simplistic. Link to comment Share on other sites More sharing options...
MrSmith Posted June 24, 2012 Share Posted June 24, 2012 Poor people buy cars as well, or do you propose to make the VAT rate on a car based on it's top speed? The bigger issue with your idea is that I think you're only considering the extremes of someone on the breadline and someone who can afford a yacht. The majority of the well off in the country are between those two extremes. What measurable purchasing differences would you see between a household bringing in 16k/annum and one bringing in 160k/annum? I might even start that question as a new thread. The rich don't spend all their money of course, they save a lot of it. Yes they do and the cheaper the car the less tax they would pay, has its price increases so would the tax payable and we already manage to tax cars at differant rates with the expensive gas guzzling 4 x 4’s costing more to tax than a small car, so it wouldn’t take much effort to do the same with VAT. It would work through the entire pay scale because the more you earn the more you spend and more likley you are to buy luxery items that would attract the highest rate of VAT. Link to comment Share on other sites More sharing options...
Guest sibon Posted June 24, 2012 Share Posted June 24, 2012 No, I have not made the same assumptions you have and this is where your calculations go wrong. You also fail to factor in the three different VAT rates we have and their impact on the purchases the two groups discussed. Your assumptions and resultant conclusions are far too simplistic. Feel free to provide a more accurate model. I was simply pointing out that rich people have more disposable income than poor ones. They save more and have more discretionary spending. That is why VAT is considered to be a regressive tax. Of course, there are ways around that. I've alluded to one in an answer to Cyclone up there ^^^. Link to comment Share on other sites More sharing options...
Guest sibon Posted June 24, 2012 Share Posted June 24, 2012 It would work through the entire pay scale because the more you earn the more you spend and more likley you are to buy luxery items that would attract the highest rate of VAT. The problem with that is that people will buy luxury goods abroad. If a Rolex attracts 30% VAT here and 20% VAT in France, guess what will happen. I'm more and more persuaded that we should tax spending more than income. Getting the detail right will be very tricky though. Link to comment Share on other sites More sharing options...
MrSmith Posted June 24, 2012 Share Posted June 24, 2012 The rich don't spend all their money of course, they save a lot of it. They may save it for a while but they always eventually spend it. Link to comment Share on other sites More sharing options...
MrSmith Posted June 24, 2012 Share Posted June 24, 2012 The problem with that is that people will buy luxury goods abroad. If a Rolex attracts 30% VAT here and 20% VAT in France, guess what will happen. I'm more and more persuaded that we should tax spending more than income. Getting the detail right will be very tricky though. I think that happens now, but don't you have to declare it, and I would also increase the tax on flights which should compensate for it. Link to comment Share on other sites More sharing options...
anywebsite Posted June 24, 2012 Share Posted June 24, 2012 I think you're wrong here. A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. The VAT rate would not decrease for the wealthy compared to the poor for the simple reason the rich spend more money. The rich spend a lower proportion of their money. They can afford to save, invest, buy property, gold & other expensive things that have no VAT. That is what makes VAT regressive. The poor need to spend all their money, most of what they spend on has VAT. There's no way around it, taxes on consumption are usually regressive, because the poor need to spend a higher proportion of their income on consumption. Link to comment Share on other sites More sharing options...
MrSmith Posted June 24, 2012 Share Posted June 24, 2012 The rich spend a lower proportion of their money. They can afford to save, invest, buy property, gold & other expensive things that have no VAT. That is what makes VAT regressive. The poor need to spend all their money, most of what they spend on has VAT. There's no way around it, taxes on consumption are usually regressive, because the poor need to spend a higher proportion of their income on consumption. Public transport Zero VAT Most food Zero VAT Accommodation Zero VAT Household Energy low VAT By the time the poor have spend their money on the things they need they won't have much left to spend on items that attract VAT. Obviously any tax system based on spending would have to make sure all expensive luxury items incurred VAT at the highest rate. Link to comment Share on other sites More sharing options...
anywebsite Posted June 24, 2012 Share Posted June 24, 2012 Public transport Zero VAT Most food Zero VAT Accommodation Zero VAT Household Energy low VAT By the time the poor have spend their money on the things they need they won't have much left to spend on items that attract VAT. Obviously any tax system based on spending would have to make sure all expensive luxury items incurred VAT at the highest rate. Gold zero VAT, savings zero VAT, houses & property zero VAT, most shares & investments zero VAT, money spent abroad zero VAT. The rich can save most of their money & they don't need to pay VAT on any of that. Link to comment Share on other sites More sharing options...
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