. . . to paraphrase the entertaining forthright but not necessarily right Mark Wadsworth.
Across the Internet*, the argument rages about whether VAT is a good idea. Mark’s view:
“Simple logic tells us that VAT is not a tax on ‘consumption’ (as if that were a bad thing), but either a tax on business turnover or a tax on gross margins (depending on how you argue it).”
if VAT was removed, prices would not stay where they were – they would fall, as competitive pressures would erode the (very short-lived) high margins that would pertain in the VAT-free world. Hence the effect of there being VAT on objects is higher consumer prices. Hence the consumer is paying it.
From a strictly economic standpoint, a VAT is great. It is essentially a flat consumption tax, like the so-called FairTax, but implemented in a way to reduce compliance problems. Because it is collected in stages along the chain of production, rather than all at the retail level, tax evasion is more difficult . . . My bottom line: If I could replace our current tax system (including the personal income tax, corporate income tax, payroll tax, and estate tax) with a VAT, I would gladly do it.
He doesn’t mention how regressive it is (which doesn’t seem to bother Matthew Parris, who is all for stealthy regressive taxes). But as a way of collecting money without distortion or hissing, it is hard to beat. Sadly enough for the poor, who will probably end up paying more than the small number of mansion owners now organising on the pages of Country Life to defeat the idea with bad arguments.
*well, between Mark and I