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Vat Should Be Imposed On Food And Children's Clothes

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David Cameron should use this summer's emergency Budget to raise VAT on a host of excluded products, including food and children's clothes, the International Monetary Fund signalled yesterday.

n an unusual intervention, the IMF said one of the best ways for the coalition Government to raise money and repair the public finances would be to remove the zero-rate that excluded a number of goods from VAT.

The recommendation came amid suspicion that the Government would also have to raise the level of the sales tax from 17.5 per cent to 20 per cent if it was to afford the tax pledges it made in its agreement earlier this week.

Although the IMF's suggestion, published in a comprehensive survey of public finances around the world, was less eye-catching than raising the headline rate, it would potentially have a greater impact on the price of goods, and on families' living standards.

The document, signed by Dominique Strauss-Kahn, the IMF's managing director, said: "There is substantial scope for improving the revenue performance of the VAT in almost all countries, including by eliminating exemptions and reduced rates."

VAT is not charged by HM Revenue and Customs on certain items, including food, children's clothes, domestic passenger transport, books and prescription drugs.

The IMF said Britain could raise 3.3 per cent of its economic output – about £50 billion a year – merely by halving the number of exemptions.

It added that despite having among the highest levels of petrol duty in the Western world, Britain could afford to increase fuel taxes slightly more, raising a further £3 billion.

The suggestions were likely to fuel suspicion that George Osborne, the Chancellor, would raise a series of taxes, including VAT, at the emergency Budget, which is due to take place within 50 days.

City commentators, including Robert Chote, the head of the Institute for Fiscal Studies, and 24 of the 28 economists regularly surveyed by the Treasury, pinpointed the sales tax as the most likely candidate to rise in the Budget.

However, few suggested that the Treasury should lift the exemptions, which also included financial services fees. Some warned that increasing VAT on zero-rated items would affect the finances of lower income families in particular.

The IFS calculated in its Green Budget earlier this year that such a move – even at a more limited level, raising only £24 billion – would account for about 7 per cent of the income among low-paid workers.

The increases may be necessary if Britain was to start reducing its deficit, the IMF said.

It pointed out that, over the next few years, Britain would need to reduce its deficit by 9 per cent of gross domestic product – equivalent to £130 billion.

The Government has yet to specify how fast it intended to cut the deficit, although it pledged to cut spending by more than it raised taxes.

IMF suggestion or not, I'd bet that the list of VAT exclusions is going to shrink considerably over the next few years.

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Tax

IMF suggestion or not, I'd bet that the list of VAT exclusions is going to shrink considerably over the next few years.

I joked about this last year about VAT2, so there is VAT2 on VAT1, at which you can introduce VAT3 which has VAT on VAT2 on VAT1

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Why not? It's a tax on consumption rather than having a job and I've always found the luxury vs necessity argument a bit silly.

Chocolate biscuits luxury, hobnobs neccessity, I ask you.

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I think we can say that Petrol will be at lest £1.50 by Winter.......factor in a collasping £ & yet MORE duty & i say £2.00 by 2011........................

;))

Ho Ho Ho

Lets see you run that "Cheap" 4X4/Scooby WRX STI GTW.......Etc

Was 80p a litre when you bought it.....singger

Mike

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Don't forget if they do this then the VAT on children's clothes will be helping to repair EU finances.

Is the IMF suggesting that we should be doing more to bailout Europe?

Just what does the IMF think will happen to aggregate demand if you start putting taxes on everything?

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why raise money?

bankers...all they can do is think of themselves.

I say. no more raising money.

lets have the Golden rules...only this time, we are starting at the wrong end...deficit.....lets build a surplus and make hay for the NEXT cycle.

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Naaa, it'll never happen - huge vote loser across the electorate and more importantly, not a big revenue gain. Much easier to pop more VAT onto fuel and claim the eco high groud.

Edited by redalert

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They should increase the amount of things that are VATable - pringles should not be vat free. Fresh fruit, veg, nuts and seeds should stay VAT free.

+1

Unprocessed food should remain vat free.

So veggies, milk etc no vat.

Chocolate cake & tins of beans, stick vat on.

You can even stick VAT on beef and call it good for the environment.

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this sort of thing has been covered in quite a few threads already

my take on food

Fresh food - Veg, meat etc ideally grown in the UK VAT free, any food thats has to be imported or not in this category (IE fast food, convienence food, micro meal etc) VAT able

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Why not? It's a tax on consumption rather than having a job and I've always found the luxury vs necessity argument a bit silly.

Chocolate biscuits luxury, hobnobs neccessity, I ask you.

If you put a tax on using a product or a service, then you indirectly tax the job that produces it

Edited by Stars

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If you tax using a product or a service, then you indirectly tax having the job that produces it

Yes. Hence indirect tax.

But an indirect tax of a foreign job does not concern me.

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VAT is effing regressive and means the poor pay more of their income in taxes than the richest.

The IMF is a tool for the super rich to hoover up yet more of the the world's wealth and is a huge scam.

Taxing food and kiddies' clothing? FFS.

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Yes. Hence indirect tax.

But an indirect tax of a foreign job does not concern me.

You are also taxing your own jobs (all of them). ..an example, vat on an imported good hits all the people in the supply chain - transport, retailers etc

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You are also taxing your own jobs (all of them). ..an example, vat on an imported good hits all the people in the supply chain - transport, retailers etc

Yes, I know that. But only partly.

Think about scrappage. There to help the British car industry, helped in large measure the Koreans.

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Yes, I know that. But only partly.

Think about scrappage. There to help the British car industry, helped in large measure the Koreans.

The concept you want is import tarriffs

They are great fun also - very costly

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Everything is vatable where I am but not all things at the same rate. Gold will not be vated because that is covered by EU treaty and would be too difficult to change for too little return.

Some of the more interesting assets to VAT would be houses, and shares. It would stop house flipping and share speculation in its tracks.

Edited by thod

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VAT is effing regressive and means the poor pay more of their income in taxes than the richest.

The IMF is a tool for the super rich to hoover up yet more of the the world's wealth and is a huge scam.

Taxing food and kiddies' clothing? FFS.

I agree.

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I think we can say that Petrol will be at lest £1.50 by Winter.......factor in a collasping £ & yet MORE duty & i say £2.00 by 2011........................

;))

Ho Ho Ho

Lets see you run that "Cheap" 4X4/Scooby WRX STI GTW.......Etc

Was 80p a litre when you bought it.....singger

Mike

I drive a performance car that can drink petrol like a rugby player drinking on a night out.

I couldn’t even tell you the exact price of petrol (~£1.19 the last time I filled up, I think). I don’t care tbh. Driving an economical diesel would save me about £750/yr but make me feel like rigor mortis has started, I’ve done it and life is for living I say.

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A free market is supposed to work by price signals, different levels of VAT distort this, and send out false signals leading to a misallocation of resources. If there has to be VAT it should be at a uniform level on everything, no exceptions. Ideally if it's range was extended this would be a done in a revenue neutral way as to avoid increasing the overall tax burden (but that's highly unlikely given that it's politicians who make the decision).

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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