Wednesday, September 03, 2008

Abolish VAT

...if only to make life massively simpler for those poor sods who have to struggle with the arcane twists and turns of this bizarre byway of the government. Why on Earth there should be so much "interpretation" going on when dealing with financial transactions is beyond me.

You may have gathered that I've just spent two weeks grappling with filling in our first ever VAT return at work which has involved a journey of discovery I hope never to revisit. I am, naturally, familiar with every damn transaction we've made since March the first - I mean who wouldn't be? I had not realised I was going to have to go through the entire books for both 2006 and 2007 as well so we can demonstrate what our normal "pattern" is. Oh the joy.

Besides that the sheer complexity of a system where even the top level VAT expert at our accountants can't work the bloody thing out and takes an educated guess - it's bonkers! VAT rules include differences between training and education. They find Bingo to be zero rated, whilst other forms of gambling are not. Electronic services are dealt with in a subtly different manner - particularly in regards to export - why?

The system clearly favours companies that can afford top notch VAT advisers and full time accountants - so it weighs more heavily upon small companies (like the one I happen to work for). As it goes VAT is also a regressive form of taxation where the poor end up paying a far higher proportion of their income than the rich - set as it is at a flat 17.5% (unless you're reduced or zero rated).

Apparently the system was invented in the fifties by a Frenchman. Now I reject out of hand any anti-French chauvinism, no borders and all that - but they don't make it easy sometimes do they? The blighters.

Personally I favour a much clearer system. The tax man asks "Are you rich?" If no he smiles and says "On your way." If so then he leads you into a darkened room where the plutocrats are squeezed and squeezed and squeezed until their pips squeak.


John Angliss said...

According to JK Galbraith, a GST/VAT type tax is one of the best ways to beat inflation. Unfortunately I've given the book back to the library so I can't tell you why :-D

Jim Jay said...

Thanks John... I think :)

Jonnie Falafel said...

Maybe I'm doing it wrong and before I had a business it certainly worried the hell out of me... but I find it quite simple...

Magnus said...

The old Progressive Conservatives introduced the GST (Goods and Services Tax) over here and we have been trying to get rid of it ever since. There is no political will and I suspect you will find the same thing will apply to VAT.

Jim Jay said...

Magnus: yeah - I'm pretty sure we're stuck with it for now

jonnie: I expect it depends what your business is. If you're an NGO working with a mixture of NGOs, charities, universities and businesses and the UN delivering goods and services (of an electronic nature plus training and educational resources) in the UK, Europe, and Africa it's a bit more tricky!