Re: @codejunky Hmm
@ Ben Tasker
"It stimulated the economy because it made things a little cheaper, so people were more willing to spend on "impulse" buys"
So for those who had the slightly extra spare cash they spent it which provides more money to the retailer which makes its way to workers. And you have those without the extra spare cash being able to afford enough (or nearer to enough) because the gov isnt appending additional cost.
"That's less about VAT itself, and more that people don't like when the price of things rises. People can grumble all they want, it does no harm to the economy so long as they continue purchasing at the newer higher point"
Unfortunately this statement is incompatible with your first. Either the economy is stimulated by reduced price or people will continue paying at the higher point. The only way I see higher prices being paid is if income increases too, but artificially inflating prices with tax does not (and cannot) inflate the wages to do this. Some people dont like a price rise. Some people cant afford it.
"As others have pointed out, VAT is a cheap tax from the collections point of view. Whilst making people more willing to spend by lowering VAT can give the economy a boost, it also means a drop in income to the Government, increasing the deficit. The two need to operate in some semblance of balance."
The ease of collection I accept as the best reason I have heard so far but this ease attacks the poor. When we talk of tax money we talk of emotive services like NHS or education etc which all suffer the same problem of declining performance as politics increases the cost and reduces the output. And of course this ignores the duck houses, second houses, porn and other perks of milking the tax payer. The size of the public sector has ballooned and so has the cost during a boom, so balance should surely follow the same principals of reducing the expenses in a recession. And reducing the expenses of the poor should reduce the dependency of the poor (the poverty trap).
"There's also the argument that (just as we saw with fuel a while back), if you remove VAT entirely, retailers will just up their prices. A commodity is worth whatever someone is willing to pay for it, if we've been paying £6 inc VAT for something, and VAT is abolished, there's no reason (OK, some brief public upset) a retailer couldn't move to just pocketing that extra 20%."
Thats fine, that is a good thing. Look at Tesco now. They had a great profit margin which has not only been slashed but decimated quickly due to the recession. pre the recession the poor had access to quality knock-off like products from the bargain stores. Due to the recession more people moved from the profiteers to the low cost offering and have forced even the big stores to reduce prices (even to make a loss). The market adapts to the situation. At the same time the gov (artificial prince inflation) upped the VAT to take more from the people.
"IMO, VAT is a far better tax than some of the other taxes we have to deal with, V.E.D being one that should be binned and replaced with something more VAT like (i.e. move it into fuel duty)."
You hear no argument from me. And over labours term so many people were pushed into higher tax brackets because they had more money. But the value of their money didnt go up which has caused people who shouldnt have been paying tax to be forced into paying tax or into higher brackets. I would love for the tax laws to be simplified and for the poor to pay no tax.