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Cutting VAT is not a way to make the tax system more progressive.
The cost is huge: a 5% cut = £32bn
It& #39;s inefficient, because businesses will retain some of the saving & not cut prices
And, where prices are cut, which customers will benefit the most? Those that spend the most https://twitter.com/guardianopinion/status/1275068532229726210">https://twitter.com/guardiano...
The cost is huge: a 5% cut = £32bn
It& #39;s inefficient, because businesses will retain some of the saving & not cut prices
And, where prices are cut, which customers will benefit the most? Those that spend the most https://twitter.com/guardianopinion/status/1275068532229726210">https://twitter.com/guardiano...
The nasty trick is that VAT is assymetric: if VAT goes up then most or all of the cost is passed by businesses to consumers. But if VAT goes down then businesses retain some or even most of the benefit. See e.g. https://voxeu.org/article/assessing-incidence-value-added-taxes">https://voxeu.org/article/a...
So it may be that raising VAT is regressive AND cutting VAT is regressive.
VAT is fun. End of thread.
