5 Responses

1. Demetrius says:

   July 9 2018 at 1:01 pm

   In a globalised and interlinked world with immediacy of communication and action the very nature of VAT becomes a fraud in itself. Who pays the piper calls the tune and all that.
   • Richard Murphy says:

     July 9 2018 at 4:54 pm

     How is VAT a fraud in itself?
     • Andy Crow says:

       July 10 2018 at 4:45 am

       “How is VAT a fraud in itself?”

       We’ve all got used to VAT and are inclined to accept it now as a given.

       It does however, have some very negative aspects. For one thing it puts a burden of tax collection on relatively small businesses and certainly used to be considered a colossal administrative imposition. (Easier these days with computerised accounts systems no doubt)

       It may not be true, but it used to be said that at 8% the revenue of VAT was negligible. If true I’m not sure 8% represents the cost of an efficient tax system (I’ve no idea how much other taxes cost to collect, but that sounds expensive).

       As you’ve pointed out with the likes of Ebay and Amazon it would make more sense to centralise the VAT collection through these large organisations than to clutter up small commercial concerns. (Maybe)

       If there are huge loopholes in the collection process it becomes ‘fraudulent’ (perhaps) because it becomes optional to pay it. How expensive would it be to close those loopholes ? (Difficult calculation because of the multiplier resultant on staffing HMRC etc. appropriately to do the work)

       Is it really a good system ? I don’t know, but it is flawed. Is there a better way ? Dunno. Not my field.

       But I have no confidence whatsoever that our government is doing it properly, and I don’t think they care enough to consider what needs to be addressed. (Because tax is boring to most people who simply don’t understand the ‘Joy’ of it)
     • Richard Murphy says:

       July 10 2018 at 6:33 am

       I am not convinced

       I do not think VAT in itself need be fraudulent

       I do th8nk the givernments’s failure to administer it can be
2. Pilgrim Very Slight Return says:

   July 10 2018 at 8:43 am

   I think that it is important that we try to link up why VAT fraud and bad attitudes to tax in general exists with other phenomenon in economics.

   A colleague at work recently had two carbon fibre wheels delivered at work for his racing bike (he is an avid cyclist – a very fit bloke – and he enters competitions etc., and needed new wheels as the others were worn out). The wheels came from China and he got them around £600 cheaper than they would be if made in Europe or the UK.

   Like me, my colleague is a public sector worker who has endured below inflation wage rises since 2010 (gosh – has it been that long?) as well as an erosion of his working conditions – effectively he has lost money like me and many others.

   The point I’m trying to make is that as long as the supply of real money in the economy shrinks (especially wages), there will be a tendency for people to seek out the cheapest route to their wants and needs and that means that VAT and other taxes will fall victim to people trying to get round not paying them.

   So there is a sort of push and pull effect in the market – vendors seeking to get around VAT as well as buyers.

   The answer as I see it is good wages. If people are paid well to work (and well enough if they can’t) then they have a enough to make purchases, pay off debt and save comfortably and they will care less about VAT (although it seems that many people forget that the damned Tories raised the VAT rate as well as other consumption taxes).

   I’ll give another example.

   A family friend recently bought her dream house – well actually she has not bought it – she is in the process of buying it – but you know about the glean the middle class can put on property debt. As per usual these days it is well-over priced for what it is and it also came with a roof that needs repairing and other issues that she knew about at the time of the purchase. Items that will need plenty of money to sort out.

   There is no doubt that she has over-leveraged herself to ‘self realise’. And maybe this is why she goes on so much about the taxes she is paying because the taxes as she sees it could be spent on other things she feels she needs rather than benefits (transfer payments for people whom she sees as layabouts.

   I find these sorts of things interesting because it makes you think about why property is so expensive but also about how some of the tax reforms discussed on this blog may help towards creating a fairer system.

   If we continue to have low wages and mismatched pricing of goods and housing, it will be perfectly legal taxation that will get the blame. And there is no joy in that given the benefits of tax to society that Richard has written about in his book.