From: traub@rtf.bt.co.uk (Michael Traub)
Newsgroups: uk.politics,soc.culture.british
Subject: Re: Simple message
Date: 6 Apr 92 07:10:30 GMT
Organization: BT Customer Systems, Brighton, UK

In article <1992Apr3.164535.29972@cl.cam.ac.uk> mrw@cl.cam.ac.uk (Michael Warner) writes:
>In article <1992Apr3.080230.7756@rtf.bt.co.uk> traub@rtf.bt.co.uk (Michael Traub) writes:
>>In article <1992Apr2.172128.3948@cl.cam.ac.uk> mrw@cl.cam.ac.uk (Michael Warner) writes:
>>
>>As  a  rich  computer  contractor  I  can  reclaim the VAT back on anything
>>which  vaguely  looks  like it can be used as part of my business. How does
>>this  fit  your  "net  transfer  from rich to poor"? Since I am effectively
>>(legally  I  might  add)  practicing tax avoidance on VAT payments how does
>>your above statement hold?
>
>Now I'm much more familiar with Australian Tax law than UK, but I'm
>absolutely certain the same rorts can be achieved with each, given the
>incentive and the right accountant.   And in Oz (which is totally income
>tax, no VAT) you can just as easily ensure that anything vaguely looking
>like it could be used as part of your business is offset against your
>taxable income.   In addition you can conduct your business in cash and
>barely be taxed at all.   Alternatively you can hire a decent accountant
>to make sure that you don't make too much of a profit on paper (his fee will 
>of course be tax deductible).
>
All you have said is also the case in the UK (except the accountants
cost a lot more). In Australia VAT goes under the name sales tax and
as I remember it was 33% on all electrical goods!

>
>>No,  this  isn't  the  argument. VAT is levied on many items which can only
>>be  described  as  "luxury items" as long as we all still live in caves. So
>>in  reality  it is a tax on all purchasers. Now say person A earns 10,000 a
>>year  and  of  that  amount  spends  4,000 on items which are VAT rated. Of
>>that  4,000  pounds  600  pounds  is VAT, so person A is paying an extra 6%
>>TAX  due  to  VAT. Now person B earns 100,000 pounds a year and being a bit
>>of  a  greedy  bastard  consumes  more  than person A, so lets say person B
>>spends  8,000  pounds  a  year  on items which are VAT rated. Of that 8,000
>>pounds  1,200  pounds  is  VAT, so person B is paying an extra 1.2% TAX due
>>to  VAT.  So even though person B in this example cosumes twice what person
>>A  consumes  (doubtful  in  reality)  person  B only has to pay 1.2% of his
>>income  in  TAX  whereas person A is forced to pay 6% of his income in TAX.
>>Hence  VAT  can  be  described  as an inequitable TAX, and is definitely an
>>example of the Tories robbing from the poor to pay the rich yet again.
>
>But I would contend that person B will be spending most of his income as
>well, and therefore paying exactly the same in VAT.   If he is indeed
>saving all his income then it is true that he will be paying less tax.
>But should he want to make use of the accumulated wealth (ie spend it)
>he will be taxed.
>
This is an invalid assumption. If person B earns ten times as much as
person A do you seriously think person B will consume ten times as much???

Person B will probably be spending the extra money on a mortgage, something
which has no VAT levied on it.

>The same effect can be achieved with income tax, as it is very easy to defer
>making any income indefinitely.   It will only be taxed when the investment 
>is cashed in.
>
Only if self employed.

>My criticism of income tax is that it is easy for a relatively large
>proportion of the population to avoid it, and an even larger proportion of
>the rich.   I read a report in Australia which showed some of the 
>richest men in Australia paying less than 10% tax, while poor Bruce Average
>pays 25-30%.   I don't call that a fair system, and I am very doubtful
>that things are any fairer over here.
>
Well we all agree that the rich should actually pay theire taxes, but that
doesn't seem like a reason to have a high VAT rate, they rich still get off
lightly.

>>
>>Well  at  least  your  heart  is  in  the  right  place,  though without an
>>understanding  of  Tory  indirect  taxation  policy  I wonder how you still
>>managed to realise it.
>
>A micro-economist would say that it really doesn't matter anyway who
>APPEARS to be paying the tax, since market forces will dictate who pays
>what.   But then again, it's a worry when you start believing micro-
>economists.
>
Especially if they say something as silly as that!


-- 
Michael Traub
BT Customer Systems, Brighton Systems Centre. traub@rtf.bt.co.uk