Tax: VAT down and taxing the rich
Morning. So a 2 and a half per cent cut in VAT and a plan to tax the rich at 45 per cent: just two of the proposals expected to be announced by the Chancellor in his mini-budget this afternoon.
The temporary reduction in VAT will mean 11p off a packet of 20 cigarettes, 353 quid off a new Ford Focus car, 31p off a 5.99 bottle of wine.
Is it enough to get you spending in the shops? And will THAT be enough to make the recession less vicious? That's what the government hopes anyway.
Plus if you earn £150,000 or more you're likely to be taxed at 45 per cent if Labour win the next election. What effect will that have on you?
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Cutting VAT doesn't mean people will go out and spend 2.5 percent more ... it just means that they will save 2.5 percent which will take more money out of the system.
Also, people should NOT spend the extra money they get in any tax cuts today ... we all know that taxes are going to increase a lot in the years ahead, so save the money now so that you can pay your taxes in the years ahead.
Plus, VAT isn't levied on the items people buy all the time (food) - so cutting VAT is relatively meaningless.
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I have to agree with you Socrates, people are not stupid - any money saved now will be used to pay off debts or stashed away to help cover the huge pay-back in the coming years.
P.S. Am I dumb? I can't figure out how a two and a half percent reduction in VAT means we save 31p off a £5.99 bottle of wine...?
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A VAT cut does little to help families like mine- we'd rather have a £20 Tesco gift card!
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Just listening to GB talking to the CBI. The man is in a state of denial.
First point, is he the Prime Minister or Chancellor? Mr Darling is redundant, not needed, Gordon can do it all.
Secondly, he (GB) believes we are in the throes of a transition from a local to to a Global economy. WHAT??? Bankers and Greed caused this, nothing else, they operate Globally and fleece local governments, even from your own estimable Robert Peston, bail outs have reached 5,000 billion, that's 5 Trillion, because bankers became greedy, they had their snouts in the trough.
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Given how much sterling has fallen against the euro and the dollar (making imports MILES more expensive than they were a year ago) the government needs to do a lot more than tinker with VAT.
All of this is like some bizarre 5-year Stalinist plan. Can't wait for the day when Gordon Brown is put out out of our misery.
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Have to agree with 'politicalparent' "A VAT cut does little to help families like mine- we'd rather have a £20 Tesco gift card!"
I've been laid off, how will a small cut in VAT or even income tax help me at the moment! There's no VAT on food, heating fuel has a lower rate of VAT and I assume will not be reduced and there is no VAT on food.
This/these cuts may help many in low paid jobs, but it will help those in hiogher paid jobs and not help the real needy!
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listening online in Australia where the Rudd government are giving families under a certain income $1000 per child to stimulate xmas spending. (my boy's getting a trampoline in case you're interested.)
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Slightly off subject but still to do with the New World we all now find ourselves in. We are in trouble, building sites are locking the doors, construction workers being laid off, yet the Government still wants / needs new homes for people, you try and get planning permission.unless you know the hand shake, the top lawyers from london or can change a policy written in 2004 by Prescott you have NO chance, I know this from personal experience, I have a building and a builder and a buyer but because a policy written over 4 years ago is still used I cannot get planning. Now I have written to everyone, few relies from Council and none from Government, so my point. I will not be alone, there will be hundreds if not thousands lucky enough to have a little bit of land and a way out, a building in dis repair that could be saved but because of mainly councillors too busy filling in expenses forms you cannot get through to anyone, planning is a joke in this country and always has been, MONEY talks, always has done, but now in this New World where the Government can change its rules wily nilly, you try and dig yourself out, you try and get on and change your own life, Forget it, ask for help? forget it, ask fro guidence? forget it, the Planning rules in this country is a joke, I know I may be re possesed, I have asked the Tories, The Labour Party and all of the councillors on the Planning committee where I live, you would be amazed at how few care, amazed at the stock anwers , it makes no sense, but unless you know how to work the system and have ALOT of money, you have no chance, so I will lose my home, claim unemployment claim rate releif, move the children from their new School, lose money, face and self respect, who cares? NO ONE.
So ask why the Planning policy cannot be looked at again, ask why it hasnt changed in over 4 years with this new world, Things have changed, the councils havent and they just do not care.
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Why not put most of the money available today into tax cuts and increased State pensions, then the Chancellor could announce that in March 2008 (or October 2008) VAT on luxury goods will go up to 25% to pay for this measure.
This would have the effect of the public thinking I will spend on those luxury goods now before the VAT increase. The Chancellor could then at a future date decide not to implement the full increase or no increase at all depending on the economy & recession at that point.
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This weekend the shops will be empty with the sound of the wind whistling through deserted streets.
The VAT cut comes in on Monday next so why would anyone go shopping this weekend and lose that 2.5%?
Done more to kill the Xmas shopping boost than anything else he could have done. No momentum and no real saving that will be meaningful.
Should have cut income tax instead.
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I am fine with increasing taxation but disposable income drives our ecconmy. So increased income tax does not drive confidence and stops people spending. People have been hammered by the poor performing pensions but we have no stimulus to save. Waive CGT on second homes; make second homes a part of pension schemes (which are tax free) and allow the housing market to part of our savings plans. Use this opportunity to drive security and long-term savings, allowing people the wealth to spend across the whole ecconomy.
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I have had enough of this ridiculous situation. Have we learnt nothing from the last 300 years of financial history?
Spending our way out of this recession will not work, just as it has never worked before. The real reason our economy is in trouble is that we have spent everything we have built up in the 90?s and worse than that with a hugely bloated, unproductive public sector replacing wealth creating private sector jobs we will be even worse off in the future. This government has destroyed this countries future and they should be called to account ? which of course no-one will. At the same time as my pension has disappeared, my business has to lay people off and my children?s future is blighted by record levels of debt in this country, the left wing cabal waltz off into the sunset with index linked pensions (that we have to pay for) and a boom in their pay-packets. I don?t know how they can sleep at night.
Jobs are created by the economy being well placed to win business in a global economy ? having a high tax, high debt economy is NOT the way to do this ? we need small government and a long term boost to private business competitiveness, not even greater government spending. This really is the lunatics taking over the asylum and it is beyond me why so me so called ?respected commentators? don?t say this.
Welcome to the Titanic, but the public sector will go on playing their music and quaffing their tax payer funded champagne until we disappear below the waves.
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This comment was removed because the moderators found it broke the House Rules.
Can anybody explain why the government are reducing VAT by a measley 2.5% but putting up taxes for high earners, increasing NI and putting up petrol yet still having to borrow money? Where are they borrowing the money from?
How reckless is it to run a country by getting into more and more debt, when we get in to debt we get penalised, we get extortionate bank charges or our small businesses are closed down, we lose our houses and our names get blackened and we can be made bankrupt.
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I believe that the government should take the VAT off the utilities, a very unfair tax,
UTILITIES SHOULD NOT BE SUBJECT TO VAT
and the more these services go up the more money the government make.
I would like to start a petition and hope that people will read this blog and comment on it.
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Can someone put me out of my misery - I'm still trying to figure out how a 2.5% reduction in VAT means a £5.99 bottle of wine is 31p cheaper?.....
Sorry to be a pain, but it's doin' me 'ead in.
Grudfuttle.
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