Skeddan Posted November 10, 2008 Share Posted November 10, 2008 The Centre for Economics and Business Research is recommending “drastic” tax cuts and spending stimuli to rescue the economy, reported the Daily Telegraph. The group says that with the bank rescue “starting to unravel” dramatic moves are needed to support the economy, including an early tax cut. It recommends reducing VAT from its current 17.5 per cent to 12.5 per cent until the end of 2009, a measure which it says would “pay for itself”. http://www.thefirstpost.co.uk/business,161...says-cebr,54794 Just a proposal at the moment, but if it were to happen how much of a hole would it leave in the budget? Does IoM being 'joined at the hip' in common purse agreement really make sense? Might it be better to go it alone - like the Channel Islands. Link to comment Share on other sites More sharing options...
manshimajin Posted November 10, 2008 Share Posted November 10, 2008 Just a proposal at the moment, but if it were to happen how much of a hole would it leave in the budget? Does IoM being 'joined at the hip' in common purse agreement really make sense? Might it be better to go it alone - like the Channel Islands. Maybe the key question is whether a significant reduction in VAT rates will stimulate the UK economy and have beneficial flow on effects here? If overall UK VAT receipts are down due to the poor trading climate won't the CPA pay less anyway? The Government needs to stop prevaricating and to decide whether it is going to manage with lower revenues or to increase taxes. There is a danger that they will be in the dark at the bottom of a big hole before they wake up to the situation. Link to comment Share on other sites More sharing options...
John Wright Posted November 10, 2008 Share Posted November 10, 2008 Given that VAT is a European tax and there is an agreement in place with band for main tax rates and 17.5%is mid band 12.5% is outside the real ability of the UK reducing VAT has an effect on prices, of certain goods and services. Not food or housing, real essentials The recession will take its toll and reduce those any way. There will be a desperation to sell manufactured gods which will pressurise prices down. So for feel good factor UK Ltd will want to go for cuts in headline direct tax rates Remember the Common Purse equalisation payment is no longer a fixed proprtion of total take but is calculated on what it is estimated we are entitled to based on outr own consumption, economuic performance etc. If our economy keeps on growing there will be no little or no reduction in our entitlement but if VAT is cut by 30% it will have a savage reducing effect on government income Link to comment Share on other sites More sharing options...
cheeky boy Posted November 10, 2008 Share Posted November 10, 2008 As I have pointed out before, I am a chef and not a mathematician, but: The government gets 70% of it's revenue from VAT It's annual revenue is about half a billion, so that's 350,000,000 So a 30% reduction in VAT would make that a loss of about 20% of revenue Perhaps this is what we need to knock the powers that be into a realisation that we cannot continue to SPEND SPEND SPEND like Viki Pollard with a lottery win Link to comment Share on other sites More sharing options...
matty Posted November 10, 2008 Share Posted November 10, 2008 There will be a desperation to sell manufactured gods I spotted a couple of girls in town at lunchtime spouting god stuff !!!! Link to comment Share on other sites More sharing options...
Slim Posted November 11, 2008 Share Posted November 11, 2008 So a 30% reduction in VAT would make that a loss of about 20% of revenue The idea is that a reduction in vat will increase spending, so the cut won't result in reduced vat receipts. Link to comment Share on other sites More sharing options...
Skeddan Posted November 11, 2008 Author Share Posted November 11, 2008 John - as I understand it a temporary derogation from EU rules stipulating 15% minimum for VAT would be allowable in circumstances - according to CEBR. (Personally I think 12.5% flat rate VAT - including VAT on children's clothes, food, books etc. has a lot of advantages). The idea is that a reduction in vat will increase spending, so the cut won't result in reduced vat receipts. Slim - I can imagine some increase in spending, but I can't see how people already in debt with big mortgages could afford to go on even bigger spending sprees than they've been doing already with previously overly-easily obtained credit. Spending would have to be a whopping 40% more than in the previous irresponsible spending culture to generate same VAT revenue. If the idea is indeed that there won't result in reduced vat receipts through increased spending, that is IMO total fantasy (to say nothing of other problems that such increase would create.) I don't think CEBR suppose there wouldn't be drastic reduction in vat receipts - just that doing this will help stimulate economy. if VAT is cut by 30% it will have a savage reducing effect on government income Hard to see otherwise. I wonder if anyone in an IoM Treasury bunker is drawing up contingency plans? (even if it is an unlikely scenario it would still have huge impact). It would be interesting to see the details and data on the common purse agreement - I'd think it could ultimately be more advantageous for IoM to go it alone rather than be joined to the hip to UK over VAT in this manner. Link to comment Share on other sites More sharing options...
ai_Droid Posted November 11, 2008 Share Posted November 11, 2008 Slim - I can imagine some increase in spending, but I can't see how people already in debt with big mortgages could afford to go on even bigger spending sprees than they've been doing already with previously overly-easily obtained credit. I think you're right, but it would still raise spending which has other knock on benefits, particularly in an environment where spending is falling rapidly. Link to comment Share on other sites More sharing options...
jehovah Posted November 11, 2008 Share Posted November 11, 2008 There will be a desperation to sell manufactured gods I spotted a couple of girls in town at lunchtime spouting god stuff !!!! Paging DJDan Link to comment Share on other sites More sharing options...
manshimajin Posted November 11, 2008 Share Posted November 11, 2008 I wonder if anyone in an IoM Treasury bunker is drawing up contingency plans? (even if it is an unlikely scenario it would still have huge impact). Skeddan I hope that they are looking into the bigger economic picture of which this forms a part. We need actions now on spending and tax rather than waiting for the oncoming wave to swamp us. There may be a VAT issue, there will be a revenue issue. Or will we hear the Geoff Corkish excuse in 2 years time? But Mr Corkish admitted he had only submitted his form at the end of October, nearly two years after he was elected, saying: 'I just forgot. It's laxity on my part. It's there now.' Link to comment Share on other sites More sharing options...
Albert Tatlock Posted November 11, 2008 Share Posted November 11, 2008 Or will we hear the Geoff Corkish excuse in 2 years time?But Mr Corkish admitted he had only submitted his form at the end of October, nearly two years after he was elected, saying: 'I just forgot. It's laxity on my part. It's there now.' The excuse then will more likely be: 'I didn't do anything for four years, because my dog chewed up my manifesto'. Link to comment Share on other sites More sharing options...
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