TSW Commission: Most goods and services should be subject to 23% VAT and not zero or 13.5%

[tomdublin]

If forced to choose, I would rather see higher vat rates than higher income taxes

Unlike income tax, VAT is regressive in that poor people spend a higher share of their income on it than the wealthy . Zero and reduced VAT rates on food are intended to make it somewhat less regressive since poor people spend a higher share of their income on food. Raising VAT on food would thus disproportionately hit the poor, which is the ideological opposite of what this TSW Commission claims to aim for. Perhaps there should have been more genuine economists on this Commission as opposed to economically illiterate social activists.

 

[NoRegretsCoyote]

Zero and reduced VAT rates on food are intended to make it somewhat less regressive since poor people spend a higher share of their income on food.

Income tax is always and everywhere progressive and consumption taxes are always and everywhere regressive. It's just a question of how you calibrate but you can't get away from this by design.

Personally I prefer high and uniform consumption taxes, something like VAT of 18% on absolutely everything. Rich people buy food too and they don't need the subsidy. People on low incomes should be supported via, well, income supports. Doing it via low VAT is not efficient as rich people like me get to benefit too and we don't need it.

FWIW alcohol and in particular cigarettes are consumed far more in relative terms (and also absolute terms too for cigarettes) by low-income people. The rates of excise are crippling for people on low incomes who are essentially being financially punished for a drug addiction. This is a highly regressive part of our tax system that gets very little attention and really should.

 

[tomdublin]

Yes, that's the elephant in the room but most of the people working in these areas are now heroes and above any criticism, constructive or otherwise.

The rates of excise are crippling for people on low incomes who are essentially being financially punished for a drug addiction

Very valid point. MUP on alcohol compounds this, despite being sold to the public as a "progressive" policy. These addiction taxes seem to be a main reason for deprivation & malnourishment of children among the poor despite relatively generous social welfare payments.

 

[Purple]

Income tax is always and everywhere progressive and consumption taxes are always and everywhere regressive. It's just a question of how you calibrate but you can't get away from this by design.

Personally I prefer high and uniform consumption taxes, something like VAT of 18% on absolutely everything. Rich people buy food too and they don't need the subsidy. People on low incomes should be supported via, well, income supports. Doing it via low VAT is not efficient as rich people like me get to benefit too and we don't need it.

You're conflating wealth and income. Why should we give supports to wealthy people who have modest incomes? If I choose to keep €3 million in the form of a house and take a low paying job then you'd give me income supports. Why?

 

[24601]

The rates of excise are crippling for people on low incomes who are essentially being financially punished for a drug addiction. This is a highly regressive part of our tax system that gets very little attention and really should.

Wait 'til you hear about minimum unit pricing.

 

[rustbucket]

Yes, and the retired couple next door are much better placed to down size and use their wealth to generate income. They have far more options as they don't have children and have far lower fixed outgoings.
The point is that the retired couple have a much higher level of wealth and a much higher descressionary income therefore we should construct our taxation and social policy based on that reality.

I disagree here. The retired couple are retired, and will presumably have paid taxes of all kind throughout their working life.
Social policy and taxation based around discretionary income? If they are retired their income is going to be generated from pensions more than likely which is already taxed. They already pay property tax and continue to pay VAT the same as everyone else.

What part of their income is discretionary? Their wealth? Wealth is not the same as income. Wealth is not the same as disposable income.
Why should they downsize. If they do why should they be taxed on it. All of their accumulated wealth will either have been earned (and taxed already) or inherited (and taxed already).

 

[Purple]

I disagree here. The retired couple are retired, and will presumably have paid taxes of all kind throughout their working life.

Everyone of every age who works has paid tax roughout their working life. Some have finished their working life, others haven't. So what?

Social policy and taxation based around discretionary income?

Yep.

If they are retired their income is going to be generated from pensions more than likely which is already taxed.

No, pensions aren't taxed until you draw them down.

They already pay property tax and continue to pay VAT the same as everyone else.

Yea, so?

What part of their income is discretionary?

The bit that they don't have to spend on utilities, housing costs (rent or mortgage) and essentials.

Their wealth? Wealth is not the same as income.

Exactly!

Wealth is not the same as disposable income.

Exactly!

Why should they downsize.

They shouldn't if they don't want to. That's the beauty of being rich, they have options.

If they do why should they be taxed on it.

They shouldn't.

All of their accumulated wealth will either have been earned (and taxed already) or inherited (and taxed already).

Or, mostly, gained through capital value appreciation. They bought a house in 1980 for a bag of bruised apples and now it's worth €800k. Fair play to them. Now they are rich and don't need social transfers from people who aren't rich (but may have a high income) and are struggling to pay the bills.

All I'm saying is that the retired couple is doing okay. They have a large descressionary income and don't need additional social transfers. Poor pensioners do but rich ones don't. That's all.

 

[PGF2016]

So remove VAT on bottled water or other such items. It's hardly insurmountable.

How about it's increased to 50% on bottles up to 1 litre and removed from bottles over that to allow for people with boil water notices?

 

[T McGibney]

How about it's increased to 50% on bottles up to 1 litre and removed from bottles over that to allow for people with boil water notices?

VAT on small bottles of water at 50% and on small bottles of Irn Bru and Coca Cola at 23%?

Only in Ireland.

 

[Purple]

How about it's increased to 50% on bottles up to 1 litre and removed from bottles over that to allow for people with boil water notices?

The simpler the tax code is the better it is.

 

[T McGibney]

How about it's increased to 50% on bottles up to 1 litre and removed from bottles over that to allow for people with boil water notices?

The simpler the tax code is the better it is.

+1
And also, the purpose of a tax system is to garner income for the State. It's not to reward or punish individuals' consumption of certain foods or drinks.

 

[NoRegretsCoyote]

And also, the purpose of a tax system is to garner income for the State.

Yes of course.

It's not to reward or punish individuals' consumption of certain foods or drinks.

Of course it is! There are many policy objectives embedded in the tax rate and the tax base. More than you could count!

 

[T McGibney]

Of course it is! There are many policy objectives embedded in the tax rate and the tax base. More than you could count!

Well they shouldn't be, at least as I described above. In my opinion.

For starters, Revenue has neither corporate responsibility nor accountability for social engineering and its consequences.

 

[Purple]

For starters, Revenue has neither corporate responsibility nor accountability for social engineering and its consequences.

No, but the government does. Tax on alcohol and tobacco is social engineering, as is the plastic bag levy. "Progressive" income tax is another form of social engineering.

That said when anyone asks me what our corporate social responsibility policy is in work I say it's to obey the law and pay our taxes. The State then uses that money to do nice things for people and all that stuff. So I get what you mean and I'm inclined to agree in principle.

 

[PGF2016]

VAT on small bottles of water at 50% and on small bottles of Irn Bru and Coca Cola at 23%?

Only in Ireland.

IrnBru and Coke should be taxed to the hilt (with exemptions if being used to treat hangovers).

The simpler the tax code is the better it is.

Agreed. But as per your comment on plastic bags some tax code complexity can be used for the greater good.