Comment by neilwilson
16 days ago
It would be far better if we could get a government in who would use Brexit freedoms to scrap VAT and all the other sales and import taxes. They are an administrative nightmare and both unnecessary and ineffective. Stick to simpler taxes.
The problem is that we have one side who loves all things EU and the other that loves all things neoliberal - both of which are obsessed with sales taxes for some reason
VAT is not really all that complicated and accounts for around 15% of the UK tax take. Moving that to income tax would mean a substantial redistribution from working people to pensioners and incentivise moving more production abroad.
Import taxes are pretty complicated but unilaterally removing them would mean we would have nothing to negotiate tariff free access to foreign markets.
Vat is stupidly complex. Try doing an international conference for example. Not to mention the impact on imports as the OP discovered.
Quite why people think tax stays in one place is beyond me - all costs are passed on and tax is no different. Putting the tax on employer NiCS for example would result in roughly the same business collection and payment, but with a significant reduction in administration and the tax gap since PAYE collection is more efficient.
And quite why obtaining foreign items more expensive is seen as a negotiating point could only be brought up by somebody who hasn’t thought through how floating exchange rates work. We want more stuff coming in and less going out. That’s how you win in international trade. Exports are a cost remember.
As we see from the US, it is the local population that pays the cost of import tariffs and taxes. The currency exchange rate fixes the rest.
A single country's tax policies don't exist in a vacuum. Let's take as an example a new car that costs £36,000 including 20% VAT. If the UK removed VAT and put the cost on employer NICS then British built cars would still cost roughly £36,000 but foreign built cars would now cost £30,000 and what little of the British car industry is left after Brexit quickly ceases to exist as the multinational companies that run them shift production elsewhere to remain price competitive.
Trump's broad based tariffs are dumb because much of what is being tariffed is not really manufactured in the US anyway. But used in a more targeted manner they can help ensure a level playing field for your country's products in the countries you have trade agreements with. Otherwise what incentive is there for another country to negotiate a trade agreement that gives equal access to says cars manufactured in either country?
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