Dividend tax is basically an income tax, so better just make dividends only payable after corporation tax and have no extra tax on dividends

Exactly. Flat-rate tax on all income (whether personal or corporate) and no double-taxation of dividends or capital gains is the way forward. And get rid of Stamp Duty while we’re at it.

Only a problem if you’re an insane mercantilist. Otherwise, you’d realise that exports are merely the dull stuff we do to pay for imports…

*sigh, try again*

Big Picture wise, let’s assume a furniture business owns the whole chain – the forest, the sawmill, the oil well (for diesel and plastic bits), the factory, the lorries, the retail shop – all UK-based. It grows the trees, makes the wood, makes the wardrobes, delivers them to the showroom and to the purchaser’s home for a VAT inclusive price of £235. It has (let us assume NO input VAT, because imports aside, UK plc collectively has NO input VAT). Of that £235 selling price it has to hand over £35 VAT.

The fact that in real life it’s different businesses running different bits of the supply chain, so all but the actual retailer think (as does Kay Tie above) ‘VAT doesn’t affect my business’.

The fact is, it does, the deleterious effect that VAT has on the wardrobe retailer filters back and hits each business in the supply chain just as badly (or possibly worse) than the cumulative total effect that it would have on a fully integrated company that owns everything from forest to delivery lorry.

*endof*

RE taxing dividends – If dividends are taken then re-invested elsewhere and not spent on goods, under the dividend tax, that re-investment is taxed. If we tax consumption, the dividends would be taxed when eventually spent, but not when re-invested elsewhere. Should we differentiate between retained profits in one company and investing profits into another? I say no. Dividend tax is basically an income tax, so better just make dividends only payable after corporation tax and have no extra tax on dividends.

VAT is not a tax on turnover. It is not even a tax on gross margins because there are, in effect, capital allowances. It’s certainly not the same as a sales tax, because a sales tax is a tax on direct sales, with special carve-outs for stock. This explains why VAT can feasibly be at 20% in Europe, whereas in the US a sales tax of 20% would kill the economy: VAT doesn’t sum through the supply chain like sales tax does.

I have no opinion on whether VAT is “good” or “bad” tax compared to NI, income tax or CT (all of them being bad). It certainly has some bad aspects: raising prices so that some sales don’t occur (depriving the seller of profit, the buyer of utility, and the Government of tax revenue).

I have enormous respect for your work and opinions, but VAT is your “rage button” like the EU is for Tim and state authoritarianism is for me.

congestion charge costs more than kit collects
IHT costs more than it collects
corporation tax costs (including all the experts in the IR and accountancy and legal firms) less than it collects
VAT collects massively more than it cost to collect because Joe Public does it for you. yes, my local gardener did my fence for £500 vat free but that only adds up to the VAT on a few trips to Sainsbury

Let’s assume that “VAT is a tax on ‘Value Added’” (aka a tax on entrepreneurial skills, aka labour, aka return on capital, call it what you will) which serves to bump up our nominal corporation tax rate (aka tax on entrepreneurial skills etc) from 28% to a minimum of 45.5% (for VAT-registered businesses, blah blah).

With the kicker that even loss making businesses have to pay it (effective rate >100%). Hurray for VAT! The Worst Tax Of All!!

Now explain this – total UK corp tax receipts, approx £40 bn per annum (excl. North Sea corp tax), total VAT receipts approx. £80 bn per annum, i.e. twice as much

(You might at this stage like to trot out the politicians’ mantra ‘VAT is a tax on consumption not on production’, I’ll deal with that little misconception later, this is just a test to see whether you believe what politicians say or whether you can think for yourself)

Mr. Prime Minister, we cannot allow a Tax Gap!

And how is this ” = Sales Tax = Turnover Tax” then? I’ll put you out of your misery and simply state that VAT is a tax on the value added to the goods and services consumed, a “value-added tax”, or VAT for short. It isn’t a Sales Tax. It isn’t a Turnover Tax.

“(clue – there isn’t one – beside my other experience I also do logic and maths)”

The kind of logic that glosses over contradictions. You need to have a chat with Bertrand Russell.

And what, pray tell, is the big difference between you making supplies to UK VAT registered business (who pay you the VAT to hand over to HMRC but in turn reclaim it as input tax) and you making zero-rated supplies to Johnny Foreigner?

(clue – there isn’t one – beside my other experience I also do logic and maths)

And yes, I do run a VAT-able business. Most of my business is with VAT-registered EU clients. Some is UK. But I’m also making substantial capital investment in kit and therefore have substantial reclaims of input VAT (regardless of whether I was selling to EU or UK businesses or indeed end consumers). The same would not be true were I operating in the US or Canada: Sales Tax applies to all purchases made by a business (except purchases for resale stock).

The rate of VAT has no impact on my business. The same would not be true for Sales Tax. Thus you cannot equate Sales Tax and VAT. They are different systems that just happen to look similar from the perspective of an end customer.

Furthermore, I refute the idea that qualifications are proof of correctness of an argument: our favourite retired accountant has qualifications too.

Anybody who wants to argue with me on this might like to run a small business; do an AAT/CTA qualification; work in tax for a few years; and do degrees in accounting and finance and law.

If I’m wrong, then I’m wrong.

Tim adds: There’s a very large difference between the two. A VAT can be charged at a much higher rate than a sales tax. Because you get it in bits though the supply chain, there’s less incentive to try and avoid it.

Other than that, you’re right of course.

Far better to reduce VAT and reduce means-testing.