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Scrappage Tax Nets Profit For Treasury

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http://www.telegraph.co.uk/finance/newsbys...r-Treasury.html

Initial industry estimates suggest the Government will make at least £100m profit out of the scheme.

It was introduced to try to stem the tide of falling demand which had seen shifts cut and waves of redundancies in an industry on which 800,000 jobs depend.

Scrappage has led to an estimated 20pc boost in sales, and is turning out to be a money spinner for the Treasury. This is because the amount of VAT the Government recoups on many of the deals is greater than the £1,000 subsidy it gives to the owner of a 10-year-old car to buy a new model.

With VAT currently at 15pc, the Treasury is in profit whenever a scrappage customer pays more than £7,600 for a car including tax. According to the motor industry the average price of cars bought under the scheme has been £9,000.

This means that the Treasury is on course to net £405m in VAT receipts, £105m more than is being invested in the scheme, if the government ceiling of 300,000 deals is reached.

According to the latest figures, more than 200,000 cars have been sold under the scheme and there is mounting pressure on the Government to extend the project.

"To say the scheme has been successful since its introduction would be a mass understatement," says Paul Williams, chairman of the National Franchised Dealers Association.

"But with the retail economic climate still fragile and an increase in VAT scheduled for January 1 2010, an extension of the initiative is vital."

If correct will these figures be used to extend the scheme?

However it appears they only make money if people buy bigger value cars.

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http://www.telegraph.co.uk/finance/newsbys...r-Treasury.html

If correct will these figures be used to extend the scheme?

However it appears they only make money if people buy bigger value cars.

Pure spin.

How many cars have been bought with VAT at 15% which would not have been bought in the next few years with VAT at 17.5 - 20%. After all cars don't last for ever and you can only defer a purchase for a limited time.

They are looking at a very temporary increase of VAT take.

In fact if the scheme was based on anything other than spin the reduced fuel use of the new greener cars which the scheme was meant to encourage will reduce fuel VAT and duty take for years to come.

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Pure spin.

How many cars have been bought with VAT at 15% which would not have been bought in the next few years with VAT at 17.5 - 20%. After all cars don't last for ever and you can only defer a purchase for a limited time.

They are looking at a very temporary increase of VAT take.

In fact if the scheme was based on anything other than spin the reduced fuel use of the new greener cars which the scheme was meant to encourage will reduce fuel VAT and duty take for years to come.

You certainly woke up early this morning with your spin and bull detector in fine fettle.

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You certainly woke up early this morning with your spin and bull detector in fine fettle.

I read this last night and mulled it over in bed ;)

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I bought a nice little Toyota Aygo for £5500 under the scrappage scheme. I'm glad to say the scrappage bonus was more than the VAT in my case. :)

If it hadn't been a finacial no brainer, I'd have kept running the scrapper.

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I bought a nice little Toyota Aygo for £5500 under the scrappage scheme. I'm glad to say the scrappage bonus was more than the VAT in my case. :)

If it hadn't been a finacial no brainer, I'd have kept running the scrapper.

Good choice. I'm glad to see my money is being wisely spent. Made abroad I take it?

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Good choice. I'm glad to see my money is being wisely spent. Made abroad I take it?

I think the factory is in the Czech Republic. They must be running at full capacity because there is a 12/14 week delivery period. At least some European workers are getting a couple of hundred $ a week doing something useful. It would be nice if we did more of the same in the UK.

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Guest sillybear2

That assumes the sales of the cars wouldn't have occurred anyway, all this scheme has done is bring forward sales, at some stage the motor industry will have to stop stealing from the future and cut capacity to match demand.

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Guest sillybear2
I bought a nice little Toyota Aygo for £5500 under the scrappage scheme.

What... with the money the government refunded you out of Icesave? ;)

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Guest sillybear2
"FREE MONEY POPULAR SHOCK!"

Free money to buy a chunk of metal that deprecates like a house brick thrown off a tall building.

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I think the factory is in the Czech Republic. They must be running at full capacity because there is a 12/14 week delivery period. At least some European workers are getting a couple of hundred $ a week doing something useful. It would be nice if we did more of the same in the UK.

The UK economy is built on selling stuff to consumers not making stuff. If they haven't the money to buy and can't get credit then give them someone elses money. Its an old Socialist principle adapted to Consumer Capitalism

The scrappage scheme has kept a few hundred car salesmen in work and supported the advertising industry.

I don't criticise you for taking advantage. If I see a £1 coin in the road I pick it up. More fool the person who lost it.]

Edited by dr ray

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Good choice. I'm glad to see my money is being wisely spent. Made abroad I take it?

What isnt n this country. The only thing we make is bad loans!

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http://www.telegraph.co.uk/finance/newsbys...r-Treasury.html

If correct will these figures be used to extend the scheme?

However it appears they only make money if people buy bigger value cars.

If this si the case we should do this for everything. Perhpas a scrappage scheme for shoes would boost the clothing industry and make money for the government and boost environmentally friendly travel. :lol::lol: Total Vested interest spin from the car indusrty.

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Pure spin.

How many cars have been bought with VAT at 15% which would not have been bought in the next few years with VAT at 17.5 - 20%. After all cars don't last for ever and you can only defer a purchase for a limited time.

They are looking at a very temporary increase of VAT take.

In fact if the scheme was based on anything other than spin the reduced fuel use of the new greener cars which the scheme was meant to encourage will reduce fuel VAT and duty take for years to come.

I've been thinking this for a while, that if everyone goes out and buys smaller and more efficient cars this will screw up future tax revenues.

But hey the short term benefit has been fantastic.

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I've been thinking this for a while, that if everyone goes out and buys smaller and more efficient cars this will screw up future tax revenues.

But hey the short term benefit has been fantastic.

Yes, the scrappage scheme should have been restricted to people buying Range Rovers. That would have saved British jobs and provided a useful income stream for the future.

Gordon Brown could then have claimed he is borrowing to invest with some justification. :lol:

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Exactly what I said would happen.

It wasn't a govt. subsidy at all. It was designed to draw (most) punters into pulling forward additional debt to mask reality until after the election.

I've been thinking this for a while, that if everyone goes out and buys smaller and more efficient cars this will screw up future tax revenues

They'll move the goal posts in a heartbeat. You've seen the CBI and their 'inevitable' raising of student loans at higher rate of interest? What do you think happens when we're all driving around in 70mpg cars putting out 100gms of CO2?

Edited by Red Karma

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Guest sillybear2
I've been thinking this for a while, that if everyone goes out and buys smaller and more efficient cars this will screw up future tax revenues.

Not for long, the system will simply be skewed downwards so these small cars are taxed 'normally', so eventually everyone ends up paying more for less.

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I've been thinking this for a while, that if everyone goes out and buys smaller and more efficient cars this will screw up future tax revenues.

But hey the short term benefit has been fantastic.

Yeah but don't you know they'll just increase fuel duty to compensate for the lost revenue!

Look at LPG, its half the price of petrol right now but I'd never convert my car to LPG on the basis of that, because i know full well as soon as it gets popular the government will raise the duty to "normal" levels.

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Yes, the scrappage scheme should have been restricted to people buying Range Rovers. That would have saved British jobs and provided a useful income stream for the future.

Gordon Brown could then have claimed he is borrowing to invest with some justification. :lol:

This was also repeated in the US, everyone went and bought cheaper, smaller cars.

I would love to see some projections on how this will affect tax revenues.

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Guest sillybear2
http://en.wikipedia.org/wiki/Laffer_curve

From this you can work out that reducing the amount people pay in tax, can actually increase the total amount you take. It's a pity then that VAT will soon be at 20%

The Laffer curve doesn't work well for purchase taxes because so much of what people buy is non-discretionary, especially so at the lower end of the income scale.

The VAT cut hasn't had much of a multiplier effect, many retailers have simply used it to boost margins, however the longterm affect of this missing revenue on the deficit is very real.

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Guest happy?
Free money to buy a chunk of metal that deprecates like a house brick thrown off a tall building.

In my experience house bricks show little sign of disapproval whether stationary or indeed demonstrating the power gravity.

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