VAT increase

[Hopkirk]

Why all the fuss about a 2.1%, increase that doesn't affect most foodstuffs, electricity, gas and a few other things?

[Gromit]

An increase from 17.5% to 20% is 2.5%.

[Hopkirk]

... which increases prices by a tad over 2.1%

[anotheoldgit]

The increase is 2.5%, 17.5% to 20%

The present VAT on Electricity & Gas is 5%, I do not know if they are altering that.

[R1Geezer]

it's 2.5 percentage points not 2.5%, important distinction!

[Hopkirk]

If something costs £100, then it is currently £117.50 with tax.

It will be £120, which is a 2.1% increase on £117.50

[Hopkirk]

Is everyone going to run around buying 'big ticket' items before January 4th, to save 2.1%?

[Hopkirk]

Fair comment.

[olddutch]

Its a regressive tax - a tax which hits the least well off disproportionately hard - so i guess the fuss maybe about the unfairness of the less well off paying proportionally more tax under the VAT increase than the better off ?

[Hopkirk]

Why does it hit the least well off hardest?

Surely the better off spent a greater proportion on taxable items?

[olddutch]

For example - if a less well off person is on say £60 a week and they need buy a necessary item or items with VAT on it - then an extra 2.1 % or 2.5% is going to hit them pretty hard ? Much harder maybe than someone £150k per week ?

Wikipedia says

"In terms of individual income and wealth, a regressive tax imposes a greater burden (relative to resources) on the poor than on the rich — there is an inverse relationship between the tax rate and the taxpayer's ability to pay as measured by assets, consumption, or income"

[VHG]

I was watching an old comedy "Steptoe and Son" from the 1960s the other day.

The younger Steptoe was asked to pay for something and he gave them the money, then the other person said "plus 8% VAT".

And it made me realise how VAT had "crept" up over the years.

I am glad the new goverment are looking at reducing government spending.

Over the last decades governments have just spent more and more, and we all just have to stump up the tax to pay for it.