Monday 24 November 2008

VAT CUT - SMOKE AND MIRRORS

After a wander round the blogs, business forums and newspapers, the general consensus seems to be scepticism on the beneficial effects of cutting VAT to 15%. Apart from the risk of many retailers not passing it on (or was that the real agenda - typical Gordon move - pretend to do one thing whilst really doing something else - journo's are so easy to fool - basic rate tax cut/abolition of 10p band - I rest my case), it will cause havoc with many websites which are less easy to amend than traditional accounting systems - never mind the complexity for those (and there are many) who still keep manual books and are on cash accounting (I won't go into detail but believe me they won't enjoy Christmas).

If he really intended to help those small businesses at the bottom of the chain he should have hiked the VAT threshold on turnover at which a business must start charging VAT to customers to at least 100k. Small businesses need a fair chance to get going before being hit by the complexities of VAT.

Some interesting points on this issue on Mark Wadworth's blog.

http://markwadsworth.blogspot.com/2008/11/hoist-by-their-own-petard.html

4 comments:

Mark Wadsworth said...

Ta for the link.

The government's problem is that they can't admit that the idea that VAT is a tax on consumption is A Big Fat Lie. It is a tax on the turnover of VAT-able businesses (or on those supplying to end customers, if you want to split hairs).

Ergo, reducing this will help businesses far more than 'consumers'; but at this stage in the game it is far more important to keep businesses afloat so that people don't lose their jobs than it is to cut prices (which are difficult to influence).

But they can't explain it that way, because that would be admitting that they have been deliberately misleading us. Serve 'em right, actually.

AloneMan said...

Hey, are yopu back in blogging business...I'd pretty much given up on you...Welcome back.

Mark Wadsworth said...

Mrs SP, re your question at mine, the UK's threshold is far, far higher than anywhere else in the EU. We have a special derogation or something but we still have to go there and grovel every year to be allowed to increase it.

Mrs Smallprint said...

I thought that might be the case (I did have a look at a rather boring directive earlier). So no scope there then unless we save billions by getting out of the EU so we can set our own policies again. Thanks for looking.