rant: VAT on food!

the Insitute for Fiscal Studies (IFS) has reccomended that VAT be extended to nearly all products – including food.. http://www.accountancyage.com/aa/news/2109049/vat-extended-nearly-spending-ifs

Apparently, they see VAT as a poor way to redistribute money because “the rich buy food too”

This is just stupid.. the same argument could be applied to personal tax allowances – the rich get the first 7k of income without income tax, just the same, but it’s clearly still redistributive, just like VAT, as the rich will not just consume more in absolute terms but will consume more VATable stuff as a proportion of this.

For those who don’t know, those things that are considered “essential” do not have VAT on them (or getting technical, attract a VAT rate of 0%). Gas/Leccy is charged at 5% and all “luxuries” are at 20%. There are some oddities in the decisions about what is considered essential, so that chocolate covered biscuits are luxuries, and rated at 20%, whilst chocolate covered cakes are essentials and zero rated.. this distinction even led to a legal definition of cakes and biscuits, after McVitees went to court to prove that Jaffa Cakes are indeed cakes, and not biscuits. (The distinction: biscuits go soft when they are stale, cakes go hard). There’s also the long running argument over tampons being VATable, and that womens razors are VATable, whilst mens are not.

The point of this essential/luxury distinction is clear though – it has the same effect as the personal allowance on income tax. If you earn less money, then you will spend more of that (as a proportion) on essentials. The principle is right (if you agree in principle on the idea of consumption tax). The decision about what to charge VAT on is often confused (why aren’t adults shoes considered essentials?).

The thought of putting VAT on all food though is utterly crazy – adding 20% to the cost of basic foodstuffs would hugely increase the cost of one of the most important things for any person – and would clearly hit poorer people harder than richer people. Already food prices are rising, and around the world we’ve seen food prices leading to unrest around the world.

The IFS are loony.. yes VAT on everything would make the system simpler, but it would also hit lower and average earners heavily, whilst the wealthy would see little effect. With food prices rising anyway, and fuel prices rocketing, we are facing a hard winter. To add 20% onto food prices would be sheer madness. A society is only three meals away from collapse, and as much as I want a revolution, I’m not overly keen on it being produced through the deliberate increase of food prices.
The only hope is that the idealogues in the tory party can’t be that stupid, can they?


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