UK moves to reduce VAT rates

spank_inferno

Looks like Brown & darling have decided to temporarily reduce the rate of vat in the UK from 17.5% to 15%.

http://business.timesonline.co.uk/tol/business/economics/pbr/article5213582.ece

I think its a good move and if extended into spring 2009 could help the UK turn around its slump in consumer spending.

Bad news for Ireland though because it will only mean that more money leaves our economy for the UK's.
Personally I feel that Lenihan/Cowan's decision to raise VAT by contrast was a mistake.
They were just looking to shore up their own balance sheet by raising taxes and not thinking of the deflationary affect it would have on the economy at large especially when compared to what the UK have done.

Do you think we should cut VAT in a similar way?
Is our exchequer too dependent on vat as a proportion of total tax take to afford it?

mikemac

I remember they cut tax from 21% to 20% a few years back
They put it back up as they reckoned business didn't pass on any savings, they just pocketed the difference.

Ok a 1% isn't huge but if the government did a drastic cut would the consumer see any difference?
And would the government actually get an increased tax take from increased business?
I don't know but I've a cynical feeling that business would keep a lot of the difference and they'd be the ones to benefit.

KhanTheMan

spank_inferno wrote: »

Looks like Brown & darling have decided to temporarily reduce the rate of vat in the UK from 17.5% to 15%.

http://business.timesonline.co.uk/tol/business/economics/pbr/article5213582.ece

I think its a good move and if extended into spring 2009 could help the UK turn around its slump in consumer spending.

Bad news for Ireland though because it will only mean that more money leaves our economy for the UK's.
Personally I feel that Lenihan/Cowan's decision to raise VAT by contrast was a mistake.
They were just looking to shore up their own balance sheet by raising taxes and not thinking of the deflationary affect it would have on the economy at large especially when compared to what the UK have done.

Do you think we should cut VAT in a similar way?
Is our exchequer too dependent on vat as a proportion of total tax take to afford it?

Of course we should cut VAT. The difference as well as the currency rate is just going to drive us all North for our shopping.

Actually, better than that, we should have an election. Send a message to these prats that we dont agree with the way they are handling to downturn.

Mr.Micro

Everything is 2 prices here anyway. Just think that one way to encourage an ailing economy is to get consumers to spend. What do Lenihan and Cowen do? Up VAT. That's real clever. Then again enough said about that disasterous budget the better. Dumb and dumber.

Permabear

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1huge1

Ya I agree with the above comments, when they increased vat they were just thinking about the present and trying to balance the exchequer instead of thinking ahead and trying to get us out of this mess.

turgon

As a youngin myself I wasnt aware unitl watching Reeling in the Years yestereve that some people were payoing 65% tax on some of their income. What an Irish thing to be doing.

genericgoon

Mr.Micro wrote: »

Everything is 2 prices here anyway. Just think that one way to encourage an ailing economy is to get consumers to spend. What do Lenihan and Cowen do? Up VAT. That's real clever. Then again enough said about that disasterous budget the better. Dumb and dumber.

Whats the point of trying to get consumers to spend when most lines of credit have been cut off by the credit crisis? Especially since the increase in consumer spending has been in effect fuelled by said credit over the last decade. While I don't agree with them raising VAT, I certainly wouldn't be in favour of a VAT cut, especially as inflation is still running fairly high above the ideal 2% rate.

Regardless of what the government did in this area, the retail/services sector was going to take a huge hit no matter what the government did. Consumer confidence is shot and no level of VAT decreases will change that. Anyways, an economy that has such a dependence on consumer spending fuelled by credit was nearly always going to end in tears eventually.

hellboy99

More shopping up north for me then

Our government should take note and follow their lead, not that they will :rolleyes:

KingSitric

Of course we should be cutting the VAT rate. And the rest.
Our governemnt is the only one in the world that is considering INCREASING taxes and REDUCING capital expenditure. Havent they learned anything during this meltdown.
We need to be stimulating the economy, not inducing a comatosed state and hope for the best!

genericgoon

hellboy99 wrote: »

More shopping up north for me then

Our government should take note and follow their lead, not that they will :rolleyes:

Our Government can't afford to follow their lead. Its already went way above its allowed debt levels under EU legislation. Its already expected to rise to nearly 7% debt to GDP. This is when the allowed level is 3% under EU rules. (And that doesn't even take into account the fact these things have generally been underestimated severly in the last year and it doesn't factor in the probable bank recapitalisation that has yet to occur)

While the EU is planning on relaxing the above debt levels, Ireland has to show its looking to bring its debt levels under control by 2010/11. So, Ireland simply can't afford to be playing a foolish gambit like reducing VAT with the EU Commission currently scrutinising their actions. This is partly the Government's fault for not having any sort of contingency plan during the boom years and simply spent like there was no tomorrow. The fact that money wasn't utilised very well is just further salt in the wounds of the Irish citizen.

Quite simply ,from a retail sector point of view, the Republic is currently unable to compete with the North and simply can't afford the measures that would be required to put us on level footing. It is to an extent the fault of the retailers themselves who have been shortchanging the Irish customer for many years now, so it is no surprise the consumer is fleeing them when times get tough.

So while it would be lovely if the Government could afford to stimulate consumer spending with VAT cuts, it can't afford it atm and certainly won't be able to if they end up having to recapitalise some of the banks. Quite simply, the retail sector has been overbloated and overpriced and severe consolidation is inevitable and necessary. Trying to stimulate consumer spending at this point is useless due to lack of credit and the lack of consumer confidence which will take more than some tax cuts to revive.

MrDaithi

Of course they should try to boost the economy and consumer spending by lowering the tax rate, not raising it, but with such low corporate tax rate that the government can't touch there isn't many levers left for them to try to bring the debt under control.
Also, for a VAT reduction to work the consumer must be 'smart' enough to realize what price differences it should be and not let the retailers screw them over but I don't think Irish consumers are able or willing to do that.
Anyways, after 10 years here, I'm still shock at how ignorant and incompetent Irish politicians, like anywhere else they're crooks but totally incompetent ones when it comes to economic matters.

KhanTheMan

MrDaithi wrote: »

Of course they should try to boost the economy and consumer spending by lowering the tax rate, not raising it, but with such low corporate tax rate that the government can't touch there isn't many levers left for them to try to bring the debt under control.
Also, for a VAT reduction to work the consumer must be 'smart' enough to realize what price differences it should be and not let the retailers screw them over but I don't think Irish consumers are able or willing to do that.
Anyways, after 10 years here, I'm still shock at how ignorant and incompetent Irish politicians, like anywhere else they're crooks but totally incompetent ones when it comes to economic matters.

I think people are now realizing that thee are cheaper options across the border. Why not let the retailers take the hit in their profits, instead of the average Irish worker?

Oh, i forgot, they are taking it now. But earning NOTHING, when they could reduce prices and still earn a healthy profit.

xOxSinéadxOx

if VAT was reduced I really can't see it being passed onto the consumer though, but at the same time raising it is a tad ridiculous!

Moriarty

We're already the second lowest taxed economy in the EU-27, just behind Slovakiaurl=http://www.oecd.org/dataoecd/48/27/41498733.pdf]1[/url. We're significantly lower than just about every other EU country. The hole we've dug ourselves seems to be in no small part due to our unsustainably low direct tax rates. This country really needs to be forced to sit through a year of first class maths lessons - you can only afford what you pay for.

Either we want a health, education and welfare system that looks after us with higher taxes, or we want a serious decline in current public services and our tax rates to remain static. Those are the options.

As far as I can see there's no stomach in this country for hospitals and schools to close en-masse, so suck it up and accept that higher taxes are required in the long term. This should have been layed out in the budget, with plans to begin to significantly raise tax rates in 2/3 years and a short term drop in indirect taxation to soften the blow of the coming year or two.

KhanTheMan

Moriarty wrote: »

We're already the second lowest taxed economy in the EU-27, just behind SlovakiaURL="http://www.oecd.org/dataoecd/48/27/41498733.pdf"]1[/URL. We're significantly lower than just about every other EU country.

Are you including VRT, VAT at 21.5%, Stealth Taxes, Stamp Duty, Fuel Duty, Alco Duty, Fags, 1% Levy, PRSI, Health Levies, DIRT, Tolls, etc in this?

We are being ridden left right and center in this country. Dont try to tell me that we pay less tax than anyone in Europe.

nesf

Moriarty wrote: »

We're already the second lowest taxed economy in the EU-27, just behind Slovakiaurl=http://www.oecd.org/dataoecd/48/27/41498733.pdf]1[/url.

A lot of that low tax base is from our very low corporate tax rates rather than very low personal taxes. Also when compared to outside the EU our tax rate doesn't look that low.

genericgoon

nesf wrote: »

A lot of that low tax base is from our very low corporate tax rates rather than very low personal taxes. Also when compared to outside the EU our tax rate doesn't look that low.

How many of these countries are attempting to run a welfare state while running those low tax rates?

hellboy99

Moriarty wrote: »

We're already the second lowest taxed economy in the EU-27, just behind SlovakiaURL="http://www.oecd.org/dataoecd/48/27/41498733.pdf"]1[/URL. We're significantly lower than just about every other EU country.
Either we want a health, education and welfare system that looks after us with higher taxes, or we want a serious decline in current public services and our tax rates to remain static. Those are the options.

As far as I can see there's no stomach in this country for hospitals and schools to close en-masse, so suck it up and accept that higher taxes are required in the long term.

If we are the second lowest it sure doesn't show when I go on holiday to another EU country, or even when I cross the border and thats even including the euro to sterling change over.
I myself bought a TV a few months back from Currys in the north (a 40 minute drive) as it worked out €400 cheaper than buying it from Currys here in the south, even the guy I bought it from couldn't believe the saving. So don't tell me that retailers here have to pay more, that may be true but I can asure you they are still making one hell of a profit, let them take a hit.

As for higher taxes that will in no way help our health, education or welfare system, the only thing that will help them is to get FF out of government. Our whole system is a sham and has been for years (money or no money), thanks to FF we've no hospital in Dundalk.

Really where is our taxes going to when they are closing hospitals, HSE is a mess, unfunding schools, can't maintain our roads or even fill a simple pothole, public transport is a joke, we pay taxes, stealth taxes, and duty etc.. on everything. I'm sorry but they are getting enough money as it is and it's not coming back to us so how is highering taxes going to make any difference.
How can Brian Cowen justify his wage along with all his FF members in government, they sure as hell don't deserve it.

I'll tell you something that would help for a start and that is catch and deport every foreign national that is here screwing are welfare system, not to mention our own and stop or at least lower the aid money our government gives to third world countries every year. I don't mean to sound harsh but if we can't even look after ourselves first why start pumping much needed money elsewhere when we so clearly need it here first.

It's how this country is ran that needs to be change first, not raise taxes.

nesf

genericgoon wrote: »

How many of these countries are attempting to run a welfare state while running those low tax rates?

Define welfare state. The US does run one but it wouldn't exactly be considered very generous.

anita.cathider

UK Reduce to 15%
We increase to 21.5%

Shame on BIFFO

Reduce standard rate to 18% now and services to 10%

A

genericgoon

nesf wrote: »

Define welfare state. The US does run one but it wouldn't exactly be considered very generous.

I would define a true welfare state as being closer to the European model rather than the American model. The American welfare system is to all extents and purposes a joke. But then again, they are trying to run welfare on cheap, the same as us. Except we're trying to run a health system, an education system, a welfare system all out of public coffers.

LordSutch

anita.cathider wrote: »

UK Reduce to 15%
We increase to 21.5%

Shame on BIFFO

Dunno what they are thinking of here, surely this will open the flood gates for shoppers going North ?

Frankie Lee

This is why the EU needs a common tax policy, countries are just entering in a race to the bottom in terms of tax policy which just puts more and more pressure on much needed public spending europe wide.

Permabear

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Frankie Lee

donegalfella wrote: »

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Which system has the least poverty and social problems though?

Permabear

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Fratton Fred

I would have thought the 20% change in the sterling/euro exchange rate was more damaging to the Irish economy than the VAT rate.

I will certainly be doing my christmas shopping online or in the North this year, it seems madness not to.

genericgoon

donegalfella wrote: »

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Just because I said the welfare system was a joke doesn't mean I am against the Anglo-American model. Simply that it a model which fundementally is unable to provide a workable welfare system of any real weight. This system is far less forgiving but as you point out, it is a model which allows people to enjoy the fruits of their labour and encourages personal responsibility and entrpreneurship.

The problem with Ireland is that not only do we expect fairly low taxes but we also want a fully functioning, high quality health, education and welfare system all out of the state coffers. We can't have it both ways! We either got toward the 'Nordic' or continental models which will involve more taxes or we have privatise some of the services which are currently run by the public sector. Quite simply, you can't run a functioning welfare state on the cheap.

Permabear

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jmayo

donegalfella wrote: »

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I would agree with you that increasing VAT is bad.
It will not help retail at this point, but as someone mentioned earlier would some retailers pass on a VAT rate cut to the consumer ?
I think quiet a few retailers in this country have been screwing the consumers over the last year or so since Sterling to euro exchange rate has become favourable.
The old chestnut trotted out has been that they only change rates sporadically and they had not implemented the new more beneficial rates.
Months on they are still screwing the consumers.
Some items are runing at upto a 40% markup between Nortth and South and that is within the same retail chain.

On other topic of taxes, I do not agree that we need huge high taxes to have an improved public healthcare.
Just run a more efficient system, with less administration overhead and more flexibility from the consultants at more competitive contracts.
Yes that involves job losses, but public healthcare should not be about providing jobs to paper pushers, it should be about providing a service to people of the state in need i.e. patients.

I don't think you can work education based on how students do in exams.
Preparing stduents for exams is not like creating a product or carrying out some distinct service. It depends on the bloody students :rolleyes:

Anyway this is going off topic and we agree at least VAT rates increasing is bad and will lose more money.