EU to tax foreign online services

[Sandsnake]

like Norton, AOL, and Amazon

Basically, while on the surface, it means that the playing field just got levelled, it also means that downloaded software, music, and services just got 17.5% more expensive for european citizens. European businesses will now find that advertising on the major search engines like Google just got much more expensive.

I'm just wondering how they expect to enforce this with companies that don't have any european offices...

[Radical Edward]

no problem with that.

[menth0l]

Originally posted by Sandsnake
it also means that downloaded software, music, and services just got 17.5% more expensive for european citizens

oh no!



...hey hold on doesn't 1.175 * 0 = 0 ?


\o/

[queball]

I don't think it would affect advertising on Google either way since that's not any sort of online purchase.

[Sandsnake]

Originally posted by Radical Edward
no problem with that.

Actually, what it will really do is harm smaller businesses. Advertising with Google just got 17.5% more expensive for European companies. That can, for a small company, raise their advertising costs a few thousand euros right off the bat. This will not apply to foreign companies who's ads appear in Europe, and most companies with no offices based in the EU will give them the finger on taxation.

-If you don't STEAL your software, it will raise the price of that.
-Ebay is going up for the UK.
-Companies that will comply will have to hire special accountants to do their books. That rise in cost will be directly reflected in their base fees.

It becomes "annoying" for the companies, but more expensive for the end users.

[Sandsnake]

Originally posted by queball
I don't think it would affect advertising on Google either way since that's not any sort of online purchase.

As I understand it, it will. I haven't seen anything official on that yet though.

[Radical Edward]

Originally posted by Sandsnake

-If you don't STEAL your software, it will raise the price of that.

software has always had 17.5% added to it. this will just increase things like amazon and ebay auctions and advertising costs, like small ads and stuff. EU companies already suffer because of this, and so now US companies can suffer too.

diddums.

[Nusselt]

well hang on i thought that european companies had to pay the tax anyway??? so whats changed for them???

[Sandsnake]

Originally posted by Radical Edward
software has always had 17.5% added to it. this will just increase things like amazon and ebay auctions and advertising costs, like small ads and stuff. EU companies already suffer because of this, and so now US companies can suffer too.

Google didn't charge VAT.

[wu_trax]

Originally posted by Sandsnake
As I understand it, it will. I haven't seen anything official on that yet though.

vat does never effect other companies, only consumers. companies get their money back.

[Radical Edward]

Originally posted by Sandsnake
Google didn't charge VAT.

The law adds a 15 to 25 percent levy on select Internet transactions such as software and music downloads, monthly subscriptions to an Internet service provider and on any product purchased through an online auction anywhere in the 15-member bloc of nations.

I don't see advertising anywhere in there. the only bit of advertising I see is this section:

For example, a UK seller will pay six pounds to list an automobile and 35 pounds for real estate, both 20 percent increases that include the UK's 17.5 percent VAT charge.

which doesn't look like google advertising.

[wu_trax]

Originally posted by Sandsnake
Google didn't charge VAT.

google still wont charge vat, since they dont sell anything, do they?

[Radical Edward]

Originally posted by wu_trax
google still wont charge vat, since they dont sell anything, do they?

you can advartise things on google, that is what he is on about. and horror of horrors, AOL will get charged VAT, which is perfectly acceptable, I don'T see why they should be given an extra edge.

[Nusselt]

hang on sandeh im confused whats the question here?? the european firms wont be affected as they were already taxed the big over seas firms are responding in different ways (moving HQ/increasing prices) and surely the overseas firms that dont have european offices would have to pay import/export tax of some sort when they fill in forms to declare goods.

[wu_trax]

Originally posted by Radical Edward
you can advartise things on google, that is what he is on about. and horror of horrors, AOL will get charged VAT, which is perfectly acceptable, I don'T see why they should be given an extra edge.

but companies (i.e. those who pay for the advertising) dont pay VAT, they get their money back. (if you dont have a completly different system in uk from what we have here, that is)

[Sandsnake]

europeans using foreign services now find themselves paying much more than they were.

The europeans I've seen upset about it are largely upset because it will increase operational costs for small businesses in europe, because of increases in advertising and the fact that they could use a foreign ISP or IPP to save a little on the backend. Ultimately, it makes it APPEARS to even the playing field, and in a larger corporation sense, it does. On a small business side though, it's "bend over and take it like a bitch."

The Europeans I'm talking to are saying it WILL apply to google.

[Sandsnake]

Originally posted by wu_trax
but companies (i.e. those who pay for the advertising) dont pay VAT, they get their money back. (if you dont have a completly different system in uk from what we have here, that is)

small businesses don't have that luxury because they aren't VAT registered and couldn't afford to be regardless.

[Dante Hicks]

Originally posted by wu_trax
vat does never effect other companies, only consumers. companies get their money back.

Winner!

[Radical Edward]

Originally posted by Dante Hicks
Winner!

heh.. yeap.

who is getting the tax in this though I wonder? is it just the EU? because tbh I didn't realise the EU could set tax in the UK.

[Sandsnake]

Originally posted by Radical Edward
heh.. yeap.

who is getting the tax in this though I wonder? is it just the EU? because tbh I didn't realise the EU could set tax in the UK.

it's an EU tax, and it's being levied to involve all EU nations, of which the UK is one.

[Radical Edward]

Originally posted by Sandsnake
it's an EU tax, and it's being levied to involve all EU nations, of which the UK is one.

as I said, I didn't realise they were allowed to set tax in teh UK, or is it just tax rates they can't fiddle with, just the things that are taxed?

[Dante Hicks]

Originally posted by Radical Edward
who is getting the tax in this though I wonder? is it just the EU? because tbh I didn't realise the EU could set tax in the UK.

They can't, but we've kind of agreed in principal to harmonise VAT (although the government are dragging their heels understandably on raising VAT on books, kids clothes, etc.)

So if the EU put VAT on a formerly exempt goods/services, then we "have to" modify our tax regulations to stay inline.

Oh, and this doesn't affect items. If you buy physical items from Amazon you pay VAT + Duty anyway on import into the UK (or EU, whatever). However, obviously "downloadable" items are currently exempt (for obvious reasons, they don't come through the post). This is just trying to fill the hole.

Note : I don't agree with VAT.

[Radical Edward]

I see, thanks for clearing that up.
and I agree with you about VAT being bad.

[Sandsnake]

Originally posted by Radical Edward
as I said, I didn't realise they were allowed to set tax in teh UK, or is it just tax rates they can't fiddle with, just the things that are taxed?

it looks like they can't effect how much the VAT is, just what is taxed.

the law as it reads seems to refer to VAT by nation rather than any regular percentage.

In essence, what they did was close a loophole. The question, of course, will be what the foreign response is. As it stands, you're exempt from sales tax in the US unless ordering from the state that the business is physically located in.

[Radical Edward]

Originally posted by Sandsnake
As it stands, you're exempt from sales tax in the US unless ordering from the state that the business is physically located in.

customs however are evil. I think they are checking every amazon package coming through now.

[Sandsnake]

Originally posted by Radical Edward
customs however are evil. I think they are checking every amazon package coming through now.

damn those wacky terrorists!

hmmm....it looks like they've included "broadcasts" in the mix, which means internet radio stations may find themselves paying VAT on royalties? That could bode poorly for a few of my favorite ones

[wu_trax]

Originally posted by Sandsnake
small businesses don't have that luxury because they aren't VAT registered and couldn't afford to be regardless.

sorry, but i seriously doubt that, because you arent able to do any buisness whatsoever if you dont have a vat-number. (how do you pay your vat? how do you get your money back? thats just not possible without beeing registered)

[wu_trax]

Originally posted by Radical Edward
I see, thanks for clearing that up.
and I agree with you about VAT being bad.

VAT is the most brilliant idea of a tax anyone has ever had. thats what i think.
its fair (people who have much money will have to pay much taxes), its easy to calculate and to some extend you can influence on your own how much taxes you want to pay. pure brilliance.
(food, and other things absolutly necessary for living should be excepted though)

[queball]

Originally posted by wu_trax
its fair (people who have much money will have to pay much taxes)

No. You probably mean fair in a redistibutionist sense and even then you're confused. Rich people don't spend all their money on TV's and other VAT-able goods.

its easy to calculate

Compared with what? Income tax? Sure. Land tax? No.

and to some extend you can influence on your own how much taxes you want to pay.

What?

(food, and other things absolutly necessary for living should be excepted though)

Huh? So people don't buy less of those neccessary things?

[wu_trax]

Originally posted by queball
No. You probably mean fair in a redistibutionist sense and even then you're confused. Rich people don't spend all their money on TV's and other VAT-able goods.

rich people will, on average buy more expensive goods and thus pay more VAT, quite simple.
(obviously a tax on capital-income is also needed, if thats what your problem was)

Compared with what? Income tax? Sure. Land tax? No.

and how can a land tax be fair? land doesnt mean a **** today in terms value

What?

if you buy less goods and safe more of your money you also pay less taxes

Huh? So people don't buy less of those neccessary things?

you dont have much of a choice with food, for example, do you? but you can freely decide if you want to buy that new big screen tv or not.

[queball]

Originally posted by wu_trax
rich people will, on average buy more expensive goods and thus pay more VAT, quite simple.
(obviously a tax on capital-income is also needed, if thats what your problem was)

Hello, I'm fairly rich and I buy very little and pay very little VAT. If you mean rich as in high income, then I'm sure low income (<£20000 ?) people spend more of their income on TVs and VAT proportionally.

and how can a land tax be fair? land doesnt mean a **** today in terms value

That's strange cos around here land is pretty valuable, particularly in commerical areas (where the comparison to VAT lies). In your country are TVs incredibly meaningful in terms of value?

if you buy less goods and safe more of your money you also pay less taxes

You aren't comparing against anything. If you don't buy any land you don't pay rates, etc. Taxes doesn't give people more "choice", it just skews markets. What I would call a fair tax is one which affects the market in a just way, so people pay for the public services they get from living in a certain area or pay for the pollution caused by buying a car.

VAT is supposed to represent the value added on each sale by various things. I don't think the cost to the world of me walking into a shop and buying some underwear is much more than the cost of me going into a shop and not buying underwear, so VAT must be a compromise rather than a great idea. I think a more important consideration is how much we know about what the tax is spent on. In Britain all tax goes into a big pot so you have less control over what it's spent on than in, say, France.

you dont have much of a choice with food, for example, do you? but you can freely decide if you want to buy that new big screen tv or not.

So what? It's more politically popular. Great. Should food be given away for free because it's necessary?

[Dante Hicks]

Originally posted by wu_trax
rich people will, on average buy more expensive goods and thus pay more VAT, quite simple.

VAT, as far as I'm aware, is on pretty much everything on the continent. In the UK it's on such luxury items as :

sanitary towels, birth control products and other health items, electricity and certain foods.

With the desire to extend it to other items.

You cannot avoid (or control) how much tax you pay under a VAT system. Let's say every item has a flat 15% VAT on it. If I receive a salary of £1000 per month, I can either spend all of this items which don't attract VAT (and spending everything on basic food stuffs seems a bit unlikely), or I can spend on whatever. OR, I can save. If I save, I will obviously pay proportionally less tax. But when I come to spend my savings (after 10 years) and buy a ferrari I will still have paid 15% of my net income towards taxation. The only real way to control the proportion of my income which goes towards tax is to purchase more stolen/black market goods. Or set fire to my money.

The issue is not whether the rich pay more than poor people. It's who pays proportionally more. Indirect taxation means the tax burden falls proportionally harder on those with less money.

Finally - VAT is not easy to administer or calculate. Due to the large number of self-employed people (or just companies in general) reclaiming VAT, etc is a nightmare.

[wu_trax]

Originally posted by queball
Hello, I'm fairly rich and I buy very little and pay very little VAT. If you mean rich as in high income, then I'm sure low income (<£20000 ?) people spend more of their income on TVs and VAT proportionally.

then what do you spend your money on?

That's strange cos around here land is pretty valuable, particularly in commerical areas (where the comparison to VAT lies). In your country are TVs incredibly meaningful in terms of value?

my point was: own much land doesnt necessarily mean you are rich whereas beeing able to buy lots of goods and thus paying lots of vat means you have a high income and are rich.

You aren't comparing against anything. If you don't buy any land you don't pay rates, etc. Taxes doesn't give people more "choice", it just skews markets. What I would call a fair tax is one which affects the market in an just way, so people pay for the public services they get from living in a certain area or pay for the pollution caused by buying a car.

it gives people more of a choice on how much money they are willing to give to the state. noone forces them to buy goods. with the income tax you have no choice whatsoever. i dont see how this influences the market at all, it only makes all goods a little more expensive, but since all goods are effected by this this has no influence on the market.

VAT is supposed to represent the value added on each sale by various things. I don't think the cost to the world of me walking into a shop and buying some underwear is much more than the cost of me going into a shop and not buying underwear, so VAT must at be a compromise rather than a great idea. I think a more important consideration is how much we know about what the tax is spent on. In Britain all tax goes into a big pot so you have less control over what it's spent on than in, say, France.

it represents the value added by each production step and it represents it quite good. your underware-shop only pays vat on the difference between what it paid to buy that underware and the price it charges you, so it pays taxes on the value it added by its service of making it easier for you to buy underware than, for example buying it directly in some factory or whatever. (sorry, i guess i ****ed up the grammar, but i hope you get the idea)

the idea of taxes is to have them pooled all together without any restriction on what they are spend on. i doubt its any different with the income tax or any other taxes.

So what? It's more politically popular. Great. Should food be given away for free because it's necessary?

i didnt say they should be taxfree because its popular, but because i dont want people to starve because of the tax-rate.

[wu_trax]

Originally posted by Dante Hicks
VAT, as far as I'm aware, is on pretty much everything on the continent. In the UK it's on such luxury items as :

sanitary towels, birth control products and other health items, electricity and certain foods.

With the desire to extend it to other items.

ok, sorry, i didnt know that.

You cannot avoid (or control) how much tax you pay under a VAT system. Let's say every item has a flat 15% VAT on it. If I receive a salary of £1000 per month, I can either spend all of this items which don't attract VAT (and spending everything on basic food stuffs seems a bit unlikely), or I can spend on whatever. OR, I can save. If I save, I will obviously pay proportionally less tax. But when I come to spend my savings (after 10 years) and buy a ferrari I will still have paid 15% of my net income towards taxation. The only real way to control the proportion of my income which goes towards tax is to purchase more stolen/black market goods. Or set fire to my money.

in that ten years the money is invested somewhere, which isnt such a bad thing, i think. if all people have some more capital there is no need for a communist world revolution any more \o/

The issue is not whether the rich pay more than poor people. It's who pays proportionally more. Indirect taxation means the tax burden falls proportionally harder on those with less money.

why? ok, then lets forget about having a choice at all and assume capital income if taxed with the same percentage as the VAT. in that case everyone would be taxed equally.

Finally - VAT is not easy to administer or calculate. Due to the large number of self-employed people (or just companies in general) reclaiming VAT, etc is a nightmare.

compared to income taxxes? no.
i guess the state would get along with half of the number of employees if we would completly replace the income tax with an increased vat-rate.
(unfortunatly there still is the black-market-problem you mentioned )

[Sandsnake]

Originally posted by wu_trax
and how can a land tax be fair? land doesnt mean a **** today in terms value

What?! land is one the single-most valuable commodities in the western world, if not the entire world.

and there are exemptions to VAT laws (ie new or small businesses) that would not, however, be exempted from paying the VAT taxes incurred here. Those companies have no way of claiming expenditures against VAT paid. For an established company, this isn't as big of a deal, but for a newer business, this raises the overhead significantly as all the work-arounds are now removed.

VAT for the UK is apparently 17.5%, toss in the fact that you have to hire a CPA that's been certified by the EU to "sign off" on your books, in MANY cases it's simply not cost efficient to reclaim that tax. In some cases, that tax is as high as 25%.

[Sandsnake]

PS. I'm a firm beleiver that money is more useful in the hands of the consumer. Taxation should be simply enough to run the necessary services, and by necessary services, the less the better. Big government is a black hole of money.

[pablissimo]

The theory would say, as Senor-trax says, that those on low incomes will spend a higher proportion of their income on what are commonly considered necessities (food, childrens clothes, 'mostly non-VAT-able items') than they will on luxury items. Similarly, theory would say that as income rises, the marginal proportion of it spent on non-VAT-able items diminishes as you start buying TVs, VCRs, DVD players, computers, etc.

So in theory, it is a good tax. And the theory does hold for most of those on lower incomes.

[queball]

Originally posted by wu_trax
then what do you spend your money on?

A nice house I guess. (I'm a student, so I'm considering my family)

my point was: own much land doesnt necessarily mean you are rich whereas beeing able to buy lots of goods and thus paying lots of vat means you have a high income and are rich.

Rich means "having a lot of money or valuable possessions", not having a high income or revenue. If you hate profit so much then you want income tax. If you want to equalise wealth in a fair way, you want a fair tax on capital, not on purchasing. I've got a computer so I don't buy anything else; someone poor without a computer might go get a job and buy a computer; he would pay VAT and I wouldn't, because he was poor and I was rich. If you only consider "lower middle class" versus "upper middle class", or whatever, then you might be right.

it gives people more of a choice on how much money they are willing to give to the state. noone forces them to buy goods. with the income tax you have no choice whatsoever. i dont see how this influences the market at all, it only makes all goods a little more expensive, but since all goods are effected by this this has no influence on the market.

I didn't realise anyone would freely choose to give money to the state. Your country = weird.
It influences markets because not all markets are inelastic. Particularly taxes made in the spirit of taxing choice.

it represents the value added by each production step and it represents it quite good. your underware-shop only pays vat on the difference between what it paid to buy that underware and the price it charges you, so it pays taxes on the value it added by its service of making it easier for you to buy underware than, for example buying it directly in some factory or whatever. (sorry, i guess i ****ed up the grammar, but i hope you get the idea)

But what value has the state added?
There is some justification in that each purchaser leaves chewing gum on the street that has to be cleaned up by a civil servant so it's fair to charge for each person who goes to your shop. Taxing based on number of people populating your shop would be complicated and would unfairly discriminate against impulse buying, so VAT is a good compromise. This sort of reasoning doesn't make any sense IMO.

the idea of taxes is to have them pooled all together without any restriction on what they are spend on. i doubt its any different with the income tax or any other taxes.

Yeah, but if people would choose to give money to the state , they would be more willing if they knew what their money would be spent on. This is how some French taxes work I hear, I haven't checked it out yet.

i didnt say they should be taxfree because its popular, but because i dont want people to starve because of the tax-rate.

No-one would starve.

[wu_trax]

Originally posted by Sandsnake
What?! land is one the single-most valuable commodities in the western world, if not the entire world.

as i said, own much land doesnt mean you are rich. then there is the problem with land is: which value does it have on your books?
ill give you an example from here: some companies bought land a short time after the war and kept it up til now. in their book this land still has the value they bought it for 60 years ago, but in reality its worth a few times more. how do you want to tax this? or do you want to have someone running around the country every few years and guess what an area of land might be worth.
another fundamental problem with this idea is that you tax substance, not buiness. i think its just aterrible idea to tax someone based on what he owns and not on how much more money he made with what he owns.

and there are exemptions to VAT laws (ie new or small businesses) that would not, however, be exempted from paying the VAT taxes incurred here. Those companies have no way of claiming expenditures against VAT paid. For an established company, this isn't as big of a deal, but for a newer business, this raises the overhead significantly as all the work-arounds are now removed.

im not familar with the system in uk. but here i guess that wouldnt make much sence. people who are new in their buiness most likely invested some money and because of that will be able to revlaim more VAT than they have to pay to the state for their own buiness.

VAT for the UK is apparently 17.5%, toss in the fact that you have to hire a CPA that's been certified by the EU to "sign off" on your books, in MANY cases it's simply not cost efficient to reclaim that tax. In some cases, that tax is as high as 25%.

as i said i have no idea about your tax-system over there, but given the fact that i live in the country with the most complicated tax-system in the entire world, here it doesnt make any difference, since you need to hire some tax-consultant anyway

[wu_trax]

Originally posted by Sandsnake
PS. I'm a firm beleiver that money is more useful in the hands of the consumer. Taxation should be simply enough to run the necessary services, and by necessary services, the less the better. Big government is a black hole of money.

then i dont understand your problem with an easy and transparent tax-system like the VAT.

[pablissimo]

Originally posted by wu_trax

As far as I know, in the UK an individual/business must register for VAT if they use more than a certain amount of taxable supplies in their production, currently set at £56k I believe. They can also voluntarily register if it's below that amount, but must from that point start charging customers VAT on their products where once they did not.

So in this instance there's a case for saying it would hit small businesses harder, though to be honest the number of small businesses as a percentage in the UK solely using the net as an advertising medium, and from there the percentage of their advertising budgets spent on online advertising, is likely to be quite low.

[Nodrog]

The amount of economics knowledge in this thread is astounding.

[Dante Hicks]

Originally posted by wu_trax
as i said, own much land doesnt mean you are rich. then there is the problem with land is: which value does it have on your books?

Anyone sane will have a realistic idea of what their assets are worth simply for credit purposes. The more assets you have, the more credit you can obtain generally. It also has general accounting value. Anyone who has a portfolio of land (for instance, like my employers) will have it continually valued to give a realistic amount for lending purposes.

If you are saying that in Germany businesses deliberately under estimate their assets worth then I've got a good idea why there's been some credit problems in Germany of recent...

[wu_trax]

Originally posted by queball
A nice house I guess. (I'm a student, so I'm considering my family)

houses are vat-free?

Rich means "having a lot of money or valuable possessions", not having a high income or revenue. If you hate profit so much then you want income tax. If you want to equalise wealth in a fair way, you want a fair tax on capital, not on purchasing. I've got a computer so I don't buy anything else; someone poor without a computer might go get a job and buy a computer; he would pay VAT and I wouldn't, because he was poor and I was rich. If you only consider "lower middle class" versus "upper middle class", or whatever, then you might be right.

people with a high income usually might become rich (if they dont act too dumb, that is)
yes, you have a computer, but what do you do with your money? you only have the choice to spend it on something else or save it and spend it later. as already said by pablissimo, poor people would most likely spend a larger percentage of their income on vat-free goods and because of that pay less taxes.

I didn't realise anyone would freely choose to give money to the state. Your country = weird.

you can influence the amount of taxes you paid by the level of your consumption, thats not that hard to understand, is it?

It influences markets because not all markets are inelastic. Particularly taxes made in the spirit of taxing choice.

if all goods are taxed equally, what difference does it make? which goods are inelastic, besides those goods necessary to survive?

But what value has the state added?

directly none at all, indirectly, take a percentage of services offered by the state. but whats the difference to lets say income tax? what did the state add to you income? or do you want to discuss the right of the state to take taxes in general?

There is some justification in that each purchaser leaves chewing gum on the street that has to be cleaned up by a civil servant so it's fair to charge for each person who goes to your shop. Taxing based on number of people populating your shop would be complicated and would unfairly discriminate against impulse buying, so VAT is a good compromise. This sort of reasoning doesn't make any sense IMO.

there is no direct link between the services the state offers and the vat-rate. just forget about the idea. taxes are taken to pay for exactly those goods that cant be priced directly.

Yeah, but if people would choose to give money to the state , they would be more willing if they knew what their money would be spent on. This is how some French taxes work I hear, I haven't checked it out yet.

sure, the state can tell you we use this tax-money for this and that, but in general the state is free to use tax-money in whichever way it makes sence. without that, the state would be even less flexible than it already is.

No-one would starve.

ok,
situation a) income tax, withabout 200 different tax-rates to make things 'fair' but no VAT. because of the low income tax- the poor are able to buy enough food to get along.
situation b) no income tax, but only VAT. 30% added on the price of food means the poor cant effort their food anymore, thats nothing i would want.

[Ebany]

As an amusing aside, Ive always wondered about how childrens clothes are VAT exempt, ie a neccesity, but adults clothes are not, therefore theyre a luxury.

Is the government saying we can all wander around naked once we are adults cause clothes are a luxury?

[wu_trax]

Originally posted by Dante Hicks
Anyone sane will have a realistic idea of what their assets are worth simply for credit purposes. The more assets you have, the more credit you can obtain generally. It also has general accounting value. Anyone who has a portfolio of land (for instance, like my employers) will have it continually valued to give a realistic amount for lending purposes.

and as a goverment, you want to rely on the assumptions of the owner of the land or by some random bank and tax by that? its a bit too easy the cheat with that idea, isnt it?
the whole problem is one of the reasons capital taxes in general were rulled illegal by our constitutional court here.

If you are saying that in Germany businesses deliberately under estimate their assets worth then I've got a good idea why there's been some credit problems in Germany of recent...

if i remember correctly they can avoid taxes with it i think. if they sell the land they fully have to pay taxes for it though. as far as i know the value in the books doesnt have much to do with the credit limits.

PS off now to watch germany loosing to faroe islands now.

[Dante Hicks]

Originally posted by wu_trax
houses are vat-free?

Yes, they are. Unless that was your point.

if all goods are taxed equally, what difference does it make? which goods are inelastic, besides those goods necessary to survive?

Plenty of markets are fairly inelastic. Petrol consumption does not increase dramatically when there is a temporary cut in consumer prices for instance. I doubt electricity usage changes that much per short-term price changes.

situation a) income tax, withabout 200 different tax-rates to make things 'fair' but no VAT. because of the low income tax- the poor are able to buy enough food to get along.

The issue is thus :

"Poor" people (i.e. those on lower incomes, although it's more complex than this, as queball said) tend to spend a higher proportion of their income. This goes without saying. If you are on a low income you tend to live from one pay cheque to another. Not due to lack of planning but there is simply less money to save, etc. A certain proportion of spending (electricity bill, telephone service charges, rent, food, etc) is more "fixed". The thing is that once poor people have spent their monthly outgoings they will have spent most of their income. So any tax system highly biased towards saving (with no regard for income) will help the rich at the expense of the poor.

Also, there's practicalities. Income tax is a pain but if I am careful I can put my spending into the things I want (e.g. a computer, a TV). Because you think this is a "luxury" the price I have to pay for it would be hugely inflated under your system. To entirely fund things through VAT (without VAT being on food, etc) the VAT level would probably need to be close to 50%. Our VAT is already quite high at 17.5% (on most items, as stated) and this only raises a fifth of government spending. So you'd at least have to quadruple the tax (and more if you're going to allow things like electricity to be exempt).

[Dante Hicks]

Originally posted by wu_trax
and as a goverment, you want to rely on the assumptions of the owner of the land or by some random bank and tax by that?

Erm, we already have to rely on business figures for capital gains tax, income tax, national insurance contributions, etc, etc.

As for credit - obviously this does depend on asset valuation. How do you think loans are secured?

[queball]

Originally posted by wu_trax
houses are vat-free?

Nope, but stamp duty is the same sort of thing.

you can influence the amount of taxes you paid by the level of your consumption, thats not that hard to understand, is it?

No-one wants to pay tax. I suppose VAT means that if you don't buy anything you don't pay anything but it's just a popularity thing.

all goods are taxed equally, what difference does it make?

Ah, I didn't look at it like that. Alright, an example:
Say you have a painting in your art gallery I want and you're willing to sell it for £90 or more. I'm willing to buy it for £100 or less. With VAT in place we don't exchange anything and are both worse off. This is why I object to taxing tranfers of money (VAT, income tax, etc). Even considering that VAT is passed on to consumers, VAT does mean that unemployed, poor, skilled people have their potential services taxed, causing poverty. While CEOs of corporations selling goods to each other at trade prices aren't taxed. Or something.

there is no direct link between the services the state offers and the vat-rate. just forget about the idea. taxes are taken to pay for exactly those goods that cant be priced directly.

I know it's not a popular idea. Taxes are (obviously) things that can be priced directly because they are: everyone pays a certain amount. It's not what could be sold consenually, perhaps.

You seem to think that the government should extract tax in any way it can without any sort of principles except popularity. You don't use the word popular, you use the word fair, but you use the word fair in such a loose sense that they're equivalent. I haven't seen any sociological or economic reason to think that VAT is fair.

[pablissimo]

Originally posted by queball
Ah, I didn't look at it like that. Alright, an example:
Say you have a painting in your art gallery I want and you're willing to sell it for £90 or more. I'm willing to buy it for £100 or less. With VAT in place we don't exchange anything and are both worse off. This is why I object to taxing tranfers of money (VAT, income tax, etc). Even considering that VAT is passed on to consumers, VAT does mean that unemployed, poor, skilled people have their potential services taxed, causing poverty. While CEOs of corporations selling goods to each other at trade prices aren't taxed. Or something.

It's surely better to have the choice of making a purchase outside of your means than to have the decision made for you by having £20 of that £100 taken away from you in the first place?