oscpacey on Nostr: If the UK removed all taxes and replaced them with a VAT (consumption tax), they ...
If the UK removed all taxes and replaced them with a VAT (consumption tax), they would maintain annual tax revenues by setting that VAT rate to about 37%.
Imagine how much simpler life and politics would be.
Taxes aren't just funding, they are also behavioural nudges so this would increase work, and decrease consumption (assuming taxes do indeed have such effects). Most people would say that's a desirable outcome.
Critics argue that this scheme costs poor people more as more of their wealth is used on spending. They are wrong, because everyone employs all available capital. The VAT rate would apply to ALL transactions not just those VATable currently, so, add in real estate, securities & commodities transactions, charitable donations, etc and now it's not regressive.
The really big surprise is that when you broaden the scope of VAT in that way, the universal rate falls from around 37% to under 10%.
Reduce HMRC to a few interns (VAT collection is easy). Reduce all politicking down to 'how to spend' from 'how to levy and spend'.
What's the caveat? We would disrupt our competitiveness on the internal market for better and worse depending on sector. The UK financial sector is smaller than it was but still dominant domestically and a 9% transaction tax might wipe out that sector.
Why don't governments do this (not just uk)?
I think it's because they want the complexity. They want levers to pull, and dominions to manage. They aren't there to run infrastructure - they are there to run the country as a business and compete with other Nation PLCs - we, the people, are staff.
Imagine how much simpler life and politics would be.
Taxes aren't just funding, they are also behavioural nudges so this would increase work, and decrease consumption (assuming taxes do indeed have such effects). Most people would say that's a desirable outcome.
Critics argue that this scheme costs poor people more as more of their wealth is used on spending. They are wrong, because everyone employs all available capital. The VAT rate would apply to ALL transactions not just those VATable currently, so, add in real estate, securities & commodities transactions, charitable donations, etc and now it's not regressive.
The really big surprise is that when you broaden the scope of VAT in that way, the universal rate falls from around 37% to under 10%.
Reduce HMRC to a few interns (VAT collection is easy). Reduce all politicking down to 'how to spend' from 'how to levy and spend'.
What's the caveat? We would disrupt our competitiveness on the internal market for better and worse depending on sector. The UK financial sector is smaller than it was but still dominant domestically and a 9% transaction tax might wipe out that sector.
Why don't governments do this (not just uk)?
I think it's because they want the complexity. They want levers to pull, and dominions to manage. They aren't there to run infrastructure - they are there to run the country as a business and compete with other Nation PLCs - we, the people, are staff.