Almost time for the ‘pre budget’ report
November 24th, 2008 by GregI realise the world is in a financial mess at the moment and the governments have to do something but I am really frustrated about what is expected to come from this afternoon’s pre budget report’. I haven’t watched it yet so what happens could be totally different.
Firstly we are expecting a 2.5% reduction in VAT. down from 17.5% to 15%. To those that do not know this is a tax we pay when we purchase items.
Now the idea is so that it encourages people to spend and help out those on low incomes, ah yea of course it is. Firstly the priority purchase of most low earners is going to be food. Guess what, we don’t pay VAT on food anyway so things will be no easier there then.
OK so it’s Christmas, people are tightening their belts this year and not spending so much on gifts, ah but this 2.5% saving is going to encourage us to spend more. Yea of course it is. Firstly how long is it going to take the stores, who are struggling themselves to adjust all of their prices? week? two weeks? month? oh no there goes christmas. If stores do pass it on straight away, is it going to make a great difference?
Say for example you planned to buy your partner a £50 gift, now that will cost you just £48.93, wow what else can you get for the £1.07 saving you just made? are you going to think wow lets go spend that on an extra gift? What a waste of time. Also is there going to be the same reduction in VAT for household fuel , the cost of which has increased by an astonishing amount this past year, as it’s just 5% now, is that going to be reduced to 2.5%?
Another expectation is the rise in the amount of tax high earners will have to pay to 45%. That’s almost half of their salary.
This is one area that really pisses me off.
You have two school leavers, earning peanuts stacking shelves in the local supermarket and paying the basic 20% tax.
After a few years one has excelled while the other hasn’t for whatever reason, the first has now left the store and runs his own chain of supermarkets while the 2nd is still working in the local supermarket.
Now the first has become a high earner because he has excelled at everything he has done in his career, he may not have worked any harder necessarily but he has excelled.
WHY should he now be punished by paying more than twice the % in tax than his mate just because he has done well for himself?
Say he is earning £150k (the expected new tax band) and his mate is earning £15k. Now if they both paid the basic 20% (or whatever it is atm) he would be paying 10 times the amount of tax because he is earning 10 times as much. But with the tax system as it is, and the expected new tax bracket he will be paying 20 times as much. HOW IS THAT A FAIR TAX SYSTEM?
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That’s how the US tax system works as well, and our new president has promised to enhance the inequality. It isn’t fair and it doesn’t encourage people to increase their earnings past a certain point. It also encourages number fudging where people put money into tax shelters or defer compensation.
The only fair tax is a flat tax, but it is much more appealing to those on the bottom to tip the scales in their favor, and their vote counts with the same weight as the high wage earner. It’s just politics. Unfortunately it enhances the division of people into classes and does not unify us, despite what they claim.
Hi Greg.
Lucky you!
Here in Portugal we pay 21% in many things, it´s a robbery.
We´re one of the countries in Europe that pays more taxes but we´re the poorest and have lower wages.
UK was very smart to keep Libra as currency, Portugal entered the Euro and since then things have never been the same, prices tripled in a short time.
A good Tuesday.
Mize
I know Spain experienced the same thing when they entered the Euro, personally I think Brussels has to much power and hope that we never get rid of the Pound (Libra).
Greg
I’m wondering if this tax cut is too little, too late! And with the gossip going around that the government made a cock-up with paperwork saying that the tax rate would go up to around 18%, will it make any difference to people spending more!
Karen,
I totally agree, 2.5% is going to make very little difference to people and with the fact that they had discussed raising it to 18% next year instead of the current 17.5% does not help. Nor does the extra 0.5% they are going to add to national insurance contributions.
What made me giggle was the fact that apart from the VAT rise, all other tax rises would be in 2011, after the next election, maybe because they think they won’t be in power and have to take the flack for it? or am I just cynical?
As I said in a similar pre-budget report preview on Angrybutton, the best way to have helped the largest number of poor people would have been to remove the 5% VAT on domestic fuel bills. That would have been too easy and too creative for darling Darling plus miserable Gordon would rather we all shivered through the winter ‘for the good of our souls’ peraps. grrr