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back to article Lower VAT could help small businesses amid recession fears

Small computer outfits could see VAT rates slashed to as low as five per cent under new proposals put forward by the European Commission yesterday. The EC, which is the executive arm of the European Union, said it wants to relax value added tax and state aid rules in a move to help small businesses (SMBs) cut through …

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Paris Hilton

Irrelevant given the family business tax

If the govt wants to help small businesses, how about not changing the tax law next year to make all family-owned businesses liable for about 100% more tax than they were this year?

Paris, because Daddy never had to worry about the family business tax.

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Happy

Tax cuts

Hallelujah! The beginning of tax cuts in the UK??

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Happy

WTF

Gordon brown _REDUCE TAXES_

Hahahahahahahahahahahahahahahaha <Breathes in> hohohohohohohohohohohohohohohohohohohohohohohohoho <falls on to floor> Hahahahahahahahahahahahahahahahahahahahahahahahahahaha <Expires>

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VAT

Vat was to pay for the napoleonic wars.

I think they are over now.

So can we stop paying?

Import duties and taxes on revenue, sorted.

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Paris Hilton

VAT, income on the dodgy.....

VAT could be seen as an extremely indirect tax on the black market. All the drug dealers, pimps, extreme pornographers (phoar) all earn money behind the taxman's back. They need to spend the money somewhere, and that's when the taxman gets their cut of the illicit cash. That's why the old chestnut "legalise it so you can tax it...." is grossly incorrect, the buggers are already taxing it.

So.....with this in mind and the dramatic increase in cyber crime, the .gov should actually be increasing the VAT rate on PC's, net connections, barbed wire lingerie sets, wetsuit and firemans helmet combo's etc.

May not be a popular view, but then neither is Skegness....

Paris, because I'd pay taxes more VAT if I could crawl naked over broken glass to stand matchsticks in her shit.......

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@Mark

That was income tax I think.

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Joke

it's hilarious.

"The UK’s Federation of Small Businesses (FSB) ..... called for the British government to relax its tax rules."

here's your answer -NO FUCKING CHANCE!

gordon clown and the boneheads will continue to fleece us and then waste it on shite for the rest of eternity.....carry on britain...

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Thumb Down

Icome tax

Mark,

I think that you mean Income Tax.

VAT seems to have been a French invention http://en.wikipedia.org/wiki/VAT

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Anonymous Coward

lol

you think that the current crop of government runners (tory/lab labtorys) have any interest in averting recession - recession = fear = willingness to sacrifice your self for security (financial and physical) = more power for those in power.

Personally I detest both VAT and Import, I mean what value is added, and why has anyone in this cesspit get money for things not made in, developed by, produced by, thought up, sold or anything else by the useless retards that cobble together this state?

Bar about 30% of my food I don't think anything I have has had anything to do with this country so why should people profit from it?

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@mike2R

You may be right.

VAT was for *some* war, though.

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Flame

Why would this make any difference at all?

Unless you sell to people (rather than businesses) this will make absolutely no difference at all. OK, maybe it will add some extra IT costs to convert your tills, web site and accounts to a different VAT rate. The man's an idiot.

If he really wants to help small businesses, then not increasing the corporation tax rate for small businesses might have been a better approach.

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Black Helicopters

paying up front

Of course i'd welcome a tax cut, but i'm also realistic about this idiot government.

Before a tax cut how about not paying tax on money i haven't earned yet.. as HMRC wants currently.

This country and most of europe is the worst place to start a business.

If you have any kind of entrepreneurial spirit, HMRC, Gordon and his Darling are sure to stamp all over it and make you remember War is Peace; Freedom is Slavery; Ignorance is Strength.

...and don't waste food, thats only for the leaders of the free world to do.

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Make way for carbon tax€

Yeah, reduce state tax, increase EU tax. Then the EU can become more powerfull. Anyway VAT is a tax on the consumer.

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VAT?

I believe it used to be 5% before Thatcher hiked it up to 17.5% to pay for her income tax cuts. In other words she cut our taxes by around 3-4% and paid for them with a 12.5% tax on everything we buy.

Of course when I say 3-4%, if you were fortunate enough to be earning above about 50K / year the reduction in taxes was just a bit more, and closer to the 12.5% increase in VAT.. say about 20%. So all's fair in the end if you don't think about it too much and do the maths.

The idea was as simple as it was bullshit. You decide what to spend your money on, and therefore you decide whether to keep paying taxes at the old rate or spend less and be taxed less.

Unfortunately very little of life's essentials actually escaped the function creep of VAT, and therefore the bullshit that you could decide your own level of taxation should have become apparent.

But far be it for anyone to remember what was said 20 years ago. Instead we should recognise that we've had a free ride on life's essentials for too long. Luxury items only? Don't make me laugh, that idea is even older than the one that let us hike VAT, and if we can't remember the reasons for the price hike, why on earth should we remember that VAT was only supposed to be applied to life's luxuries?

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Bronze badge
Go

It's a good start

'Neelie Kroes said: "These new rules set out a clear framework to allow Member States to grant aid targeted at creating jobs, boosting competitiveness and improving the environment without the Commission having to get involved at all."'

This idea of doing things "without the Commission having to get involved at all" seems like a winner. This approach could clearly be applied to good effect over an increasingly wide area. It's surprising that no one has thought of it before.

Similar benefits could be achieved not only with "new rules" but also by removing some of the existing ones and by removing redundant bureaucratic structures. Truly, Kroes has offered us hope in these dark times.

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@Hugh, and all

I've long argued that VAT should be ~40-50% for non-essentials, Income Tax should be zero, and NI should be scrapped too.

Got a route around income tax, like so many people who earn 6 figures or more? Got "grey" income that's not taxed? Some other third thing? Oh well, you still buy stuff, you're still here, you can't escape.

Also it'd seriously streamline tax collection, half the IR would be redundant, HR/payroll departments work would be cut across the land, and the swines who earn twice what the rest of us do and pay half the tax would suddenly find they had to if they wanted to actually use the cash...

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Anonymous Coward

@Andy Bright

And it was the tories that introduced VAT on domestic fuel bills, which labour (in a moment of competence) then cut.

Never forget, the tories are past-masters at using stealth taxes to pay for tax cuts for their wealthy mates.

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Stop

What a load of balls

While cutting VAT might help small businesses make more money (bet they don't pass the cut on to their customers) it won't reduce red tape. If VAT is 5% or 1% instead of 17.5% you still have to do the same sums every month, submit forms to the VAT man, write cheques, keep accounts, undergo occasional audits. The only way to reduce red tape would be to make small businesses entirely exempt. The obvious way to do that is to raise the threshold. But then, if you're VAT-exempt you have to *pay* VAT when you buy something from your non-exempt supplier because he's *not* exempt, and can't claim it back later.

STOP. And THINK.

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Anonymous Coward

Simplify the tax system...

and that would save heaps more.

Don't cut VAT. VAT is a consumption tax which is the most effective tax for spreading the taxation burden. High income tax penalizes your earners and workers which I believe is only 33% of the population. VAT means you effectively tax all transactions and spread that across all consumers and since living makes you a consumer spreads the tax burden over the whole society.

The UK has one of the most complex tax systems in the world and would help small business and large (though particularly small through lack of access to affordable expertise) by simplifying the tax system.

Abolish all taxes other than VAT and income and then make corporations tax and personal tax the same. I would propose a flat 30% for both. In order not to cause low income people to suffer make the first 15K pounds tax free (or what ever figure makes the tax burden on the average earner the same). VAT should be collected at the border as well for all imports.

This has a couple of huge advantages the first of which is this is simple! No NI, no weirdo company car tax schemes, no incentive to try and move money around to save tax. The savings in accountant and legal bills would be huge and small business would cope better as they wouldn't need a CPA to do end of year.

The other major advantage is it would encourage an increase in the saving rate. If spending money is more expensive people have an urge to save it instead. This would be a simple way of avoiding a future credit crunch and reduce peoples exposure to rising interest rates.

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VAT is a pain

I sometimes wonder why the "red tape hurts business" crowd aren't complaining about VAT all the time. Perhaps they're afraid of Customs and Excise.

Seriously, though, tracking VAT adds a layer of complexity and a whole lot of extra work to running a business. Remember that you have to add VAT to every to every eligible thing that you charge for, and maintain a total of all the VAT paid to you, and also maintain a total of all the VAT paid by you for VATable thing that you buy. At the end of the month you have to subtract the second total from the first, and send the resulting amount to your VAT office along with a VAT return.

And too bad if your VATable outgoings are greater than your VATable income one month, because then the VATmen have to pay *you* money, and you are more or less guaranteed a visit from an audit team, who will want to go through all your books. With some types of business, such as building or service laying contractors, this can happen several times a year.

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Anonymous Coward

@Peter

>> I've long argued that VAT should be ~40-50% for non-essentials, Income Tax should be

>> zero, and NI should be scrapped too.

What, and you think the rich wouldn't find/make loopholes?

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@Andy Bright

Check your history: in '79 when Maggie came to power VAT was already at 12.5% and then it was raised to 15% to offset the Income Tax cuts. It wasn't until '91 when it was raised to 17.5%, supposedly to offset Community Charge Relief (i.e. reduce 'poll tax' bills, but increase tax for everyone across the board).

Although VAT was originally brought in as a tax on luxury items, there was also a goods and services tax of 8% in '79, 5% was the EEC minimum VAT rate, but the UK had a zero rate exemption for certain items (books, domestic fuel, etc).

The EU currently state that min VAT rates should be 15% with the UK having one of the lowest rates at present, the average is apparently in excess of 22%.

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