Time To Abolish VAT?

Surely, now is the right time to abolish VAT.

Apart from being a grossly unfair tax - a tax through which even the poorest of pensioners have to pay the same tax for goods and services as the richest of billionaires – VAT also acts as a major impediment to the growth and success of businesses and it acts as a major disincentive to consumer spending.

the imposition of VAT acts as a major obstacle to nearly all economic activity.

It is accepted by nearly all economists that countries such as the UK need to stimulate economic activity if they are ever going to crawl out of the current economic crisis, but the imposition of VAT acts as a major obstacle to nearly all economic activity.

As a result of VAT, goods and services cost people significantly more than they would otherwise do (which means that they buy fewer of them) and it acts as an extra tax on most businesses.

Indeed, for most small businesses and for most of the self-employed, VAT is nothing more than a large extra tax that is imposed on their gross income. It is a very unfair tax that penalises small businesses particularly harshly.

There are more than 22,000 civil servants employed in VAT collection

The collection of VAT also costs an enormous amount of taxpayers' money. There are more than 22,000 civil servants employed in VAT collection (which costs over 1 billion pounds per year) and businesses have to expend many billions of pounds every year and millions of hours in order to deal with all the red tape that is involved in VAT collection.

People could both buy more and save more

Abolishing VAT would transform our economy. People could both buy more and save more – and both buying more and saving more is exactly what economists say would get us out of the current economic crisis. Businesses, both big and small, would be able to make greater profits and they would also have to waste far less time and money dealing with complicated government regulations.

Abolishing VAT would reduce the income of the government by about 100 billion pounds, but much of this money would be recuperated by the massive increase in economic activity that would result.

For example, the predicted increase in unemployment that is going to arise out of the current economic crisis is going to cost more than 40 billion pounds in benefits alone.

Abolishing VAT would act as such a large stimulus to the economy that the unemployment figures would fall very dramatically indeed.

Furthermore, government spending has been far too high for the past decade and it needs to be reined in.

The government, however, seems determined to continue to force current and future taxpayers to bear the costs associated with keeping government spending high.

But how can it be fair to expect our young men and women to foot the bill over the next decade or so for the government failures of today? Surely, this is just diminishing their future prospects.

Indeed, when the government convinces the public that, “Government services must be maintained in these most difficult of times,” it is merely articulating the view that everyone who does not work for the government must bear all the costs of the current crisis while those who do work for the government must not.

Thus, the government is quite happy to see the income of all pensioners who have not worked for the state plummet like a stone, while those who have worked for the state continue to have their pensions safeguarded by the very people who are having to pay most of the costs incurred by the current crisis.

Indeed, those retirees who do not have government pensions have seen their savings and their pensions slashed both through the falling stockmarket and through the large reduction in interest rates that have recently taken place.

And with the added prospect of the government increasing the money supply in order to stimulate economic activity, it seems likely that an increase in inflation is almost guaranteed to take place. And this, once again, will hit those pensioners who have not worked for the government, while those who are living off government pensions will remain unaffected because their pensions are inflation-proofed.

Furthermore, with the value of the pound having decreased hugely in comparison to other currencies, even holidays abroad are now considerably more expensive.

the government is essentially pulverising those who work in the private sector

To get out of the current crisis, the government is essentially pulverising those who work in the private sector in order to maintain jobs and pensions within the public sector. It is creating a privileged and protected aristocracy who work for the government while gradually enslaving and impoverishing those who do not.

The upshot is that the government is helping to strangle the UK's economy, and the only solutions that the government seems to be offering are those through which government gains more and more control over who gets what.

But abolishing VAT would liberate the entire economy. It would help the poor. It would help businesses both big and small. And it would get rid of a mountain of wasteful red tape and all the costs associated with it.

But the government will not abolish VAT for one reason and for one reason alone. It would reduce the power and the reach of government. And this is the very last thing that governments ever want to do. As far as they are concerned, the more government the better.