Top Tory Kit Malthouse wants direct taxes replaced with VAT. The policy would mean the poorest paying 30% more in tax while the richest got a 9% tax cut.
Boris Johnson’s deputy mayor, Kit Malthouse, yesterday suggested that direct taxes should be replaced with VAT. The policy would result in an astonishingly regressive shift in the tax system.
In yesterday’s Times, Malthouse wrote:
“Whichever way you look at it, cash is on the way out, and this means an indirect, universal sales tax could be on the way in, as a replacement for all direct taxes. The amount of tax collected may well be the same, but the big benefit would be an end to the mindless game of cat and mouse among politicians, corporate Britain, the Inland Revenue and the long-suffering public.”
The wisdom of the policy has been questioned by Paul Waugh, Next Left and the Daily Mirror but the full horror of its regressive nature is only just becoming clear. Analysis carried out for Left Foot Forward by Howard Reed using ONS data shows the distributional impact of replacing direct taxes such as income tax and employee national insurance with VAT. The chart shows that the poorest families would be hit with a 30 per cent tax hike while the richest would face a 9 per cent tax cut. Reed estimates that VAT would have to rise to 55 per cent to cover the loss in income tax and NICs.
Malthouse has form on hair-brained tax schemes. In 2004, he promised that Westminster City Council could stop charging council tax by 2012. VAT is popular with conservatives since it fits with their flat tax philosophy. Earlier this parliament, George Osborne wrote:
“Flat tax scores highly on the age-old principles of good taxation, famously laid down by Adam Smith, who said that taxes should be efficient, transparent, simple and fair. They are easy to collect. The amounts charged are predictable. The burden on companies and individuals is low.”
33 Responses to “Top Tory’s VAT plan would leave poorest 30% worse off”
paul crichton
RT @leftfootfwd: Top Tory's VAT plan would leave poorest 30% worse off http://bit.ly/aH2gHS
Stuart Madewell
Why haven’t you rebutted the Toreis NICS claim? Why haven’t you debunked their claim that its a ‘Tax on Jobs that is killing the recovery’? Who is Gershon and are his proposals that Cameron and Osborne base their claims on credible.
Just dismissing the buisness leaders who wrote in support of the Tories as privaledged or deluded won’t cut it. Increasing NICS increases the costs of buisnesses.
You have to show that it is necessary and it is trhe right thing to sdo whilst at the same time reecognising the difficulties it will create.
You also have to explain why increasin NICS instead of VAT is both fairer and sensible from an economic point of view.
Attacking Kit Malthouse may be fun but is beside the point.
Its time to raise your game Will
Anon E Mouse
Will – Don’t stoop to telling lies – you’re not Shamik Das. There is no Tory plan to increase VAT and you know it.
It’s over Will and you should be acting in a truthful manner and considering the left in the future in Britain.
Stop supporting the unsupportable…
Henry
Anon: in 1979, the Tories said they had ‘absolutely no intention of doubling VAT’ (which Callaghan said they’d have to do to pay for their plans), saying it was a ‘Labour Lie’. In a amazing bit of devious political footwork, they then increased VAT from 8% to 15% as soon as they were elected. Why should we believe them now?
In his memoirs, Geoffrey Howe (the Tory Chancellor after 1979) described this as ‘part of the small change of election campaigning’. You’ve been warned.
SteveTaff
Top Tory's VAT plan would leave poorest 30% worse off | Left Foot … http://bit.ly/d5kpLk – Freedom