Election Year or Fear!

[Geoff Parkstone]

OK exaggeration, lets see

100 is paid to a normal basic rate tax payer to keep it simple. Lets call him Joe. Before it hits his bank account 30 goes to HMRC in tax and NI |(we will ignore the extra 15 of employers NI for now)extra `

Joe spends his net wages on essentials and whatever else he wants, and lets assume he doesnt save anything. So he gets hit for VAT on some of it, fuel tax, alcohol and tobacco taxes. Lets say half his spend is subject to VAT etc or other "purchase taxes" at an average of 20% - in reality the tax on fuel etc is a much higher element. But lets say thats 14. So iteration 1 gives HMRC 44% of that extra 100.

so those people who he buys from make a profit of lets say 50% on his 70 spend (less the 14 already paid in purchase taxes) and they too suffer base rate and NI on it and of course pay VAT etc on the goods they but to resell to Joe.... and the wheel just keeps on turning: more tax whenever anyone earns anything or spends anything. And god help you if you die.

the three iterations is not my figure but one I was taught in basic Economics 1.1. The tax multiplier effect

Where are the leaks? Savings perhaps but that usually leads to someone else borrowing and spending the laon and thus paying more tax on that perhaps. Money spent overseas will avoid the grasp of HMRC bit it also leaves the UK economy in entirety.

So actually increasing the rate of tax, or decreasing it, doesnt actually make a lot of difference to "who gets it" but rather effects how long it takes for them to get it. Charge more tax, get it quicker - you dont necessarily get any more but you may get it ibn different ways but with collateral damage on inflation, unemployment, savings strategies etc.

Now obviously its not that simple but it doesnt take long for ever amount of growth in the economy to cycle into the governments hands as tax. The only way to increase tax take overall is real growth in the economy, which of course is stunted by increasing taxes.

or borrowing. Which is the usual way forward seen by most governments of whatever hue, despite protestations that they wont increase it. Borrow and inflate away its true cost ?

PS I agree with you re Tesco who are exploiting both suppliers, employees and customers for ever growing profits - so too most big companies involved in the food industry. Much like the energy companies exploiting the fact that they trade in necessities, there is a need for moderation and control via tax system

[swaledale]

OK exaggeration, lets see

100 is paid to a normal basic rate tax payer to keep it simple. Lets call him Joe. Before it hits his bank account 30 goes to HMRC in tax and NI |(we will ignore the extra 15 of employers NI for now)extra `

Joe spends his net wages on essentials and whatever else he wants, and lets assume he doesnt save anything. So he gets hit for VAT on some of it, fuel tax, alcohol and tobacco taxes. Lets say half his spend is subject to VAT etc or other "purchase taxes" at an average of 20% - in reality the tax on fuel etc is a much higher element. But lets say thats 14. So iteration 1 gives HMRC 44% of that extra 100.

so those people who he buys from make a profit of lets say 50% on his 70 spend (less the 14 already paid in purchase taxes) and they too suffer base rate and NI on it and of course pay VAT etc on the goods they but to resell to Joe.... and the wheel just keeps on turning: more tax whenever anyone earns anything or spends anything. And god help you if you die.

the three iterations is not my figure but one I was taught in basic Economics 1.1. The tax multiplier effect

Where are the leaks? Savings perhaps but that usually leads to someone else borrowing and spending the laon and thus paying more tax on that perhaps. Money spent overseas will avoid the grasp of HMRC bit it also leaves the UK economy in entirety.

So actually increasing the rate of tax, or decreasing it, doesnt actually make a lot of difference to "who gets it" but rather effects how long it takes for them to get it. Charge more tax, get it quicker - you dont necessarily get any more but you may get it ibn different ways but with collateral damage on inflation, unemployment, savings strategies etc.

Now obviously its not that simple but it doesnt take long for ever amount of growth in the economy to cycle into the governments hands as tax. The only way to increase tax take overall is real growth in the economy, which of course is stunted by increasing taxes.

or borrowing. Which is the usual way forward seen by most governments of whatever hue, despite protestations that they wont increase it. Borrow and inflate away its true cost ?

PS I agree with you re Tesco who are exploiting both suppliers, employees and customers for ever growing profits - so too most big companies involved in the food industry. Much like the energy companies exploiting the fact that they trade in necessities, there is a need for moderation and control via tax system

Thanks for explaining that your assertion was an not only an exaggeration but false, its appreciated. Not that the tax system doesn't need reforming, its far too complicated and weighted against those who earn the least. Yeah and I did economics, Jeez, so many theories, so much BS!

Of course if you want to look at what a low tax economy looks like, consider the US. Where the richest country in the world has some of the highest levels of poverty and inequality. Still its the land of the free I guess.

Then for a high tax comparison, look at Norway.