Zoe Williams attempts a tax article

And the results are amusing if not pretty. My comment there:

 

This is going back some years – VAT was brought in in 1973 – but it is indeed a very unfair way to tax arcades: it\’s a consumer levy, and normally shops pass it straight on to the consumer. But as Ball explains: \”You can\’t say \’This machine is 2p plus VAT. You have to swallow it all yourself.\”

But that\’s not how arcades are taxed. From the link Zoe herself gives us:

2.4 VAT

You must account for VAT on the taxable takings of amusement machines. This is the amount put into the machine less the amount returned by the machine as winnings to players (except winnings returned to you or people acting on your behalf). It also includes any money in the machine\’s payout tubes in excess of the float.

VAT isn\’t payable on the turnover of the machine. It\’s payable only on the margin collected from the machine. It\’s not the 2p you put in that pays VAT……it\’s the 10p minus the 8p you win (80% payouts are pretty standard) that pays VAT.

So, what\’s the new tax system proposed? That\’s something called Machine Gaming Duty. Originally proposed under Darling (in 2009 anyway). Which will:

\”This new \’slot machine tax\’ or \’Machine Gaming Duty\’ as it is termed, represents a fundamental shift in how the Treasury is seeking to tax this particular activity. Ostensibly, a shift towards a gross profits tax relieves the operators of having to apply for Amusement Machine Licence Duty licences and having to account for VAT on their takings. AMLD was generally charged at a flat rate, dependent on the category of machine and was not influenced by turnover or profit. VAT had to then be accounted for on the net takings of the machine meaning that operators faced a mixture of a flat fee and a transaction based tax.

So, we replace a turnover tax, VAT, on the machine\’s takings (note, not throughput, but takings) with a gross profit tax on takings. Given that the proposed rate seems to be 15%, and 15% is lower than the current 20% VAT rate, this actually seems to be a decline in the amount these arcades are being taxed, not an increase.

Which makes the whole premise of the article a little silly really.

There is one possibly detrimental part to the change: what were formerly \”games of skill\” like quiz machines will now be taxed the same as \”games of chance\” like fruit machines. Where our 2p pusher machines live in these classifications I don\’t know. Perhaps someone could write an informative article for a newspaper on the subject or something?

6 thoughts on “Zoe Williams attempts a tax article”

  1. Grauniad hack can’t handle basic arithmetic – gorblimey it’s a shocker. It’s no wonder that with such a basic level of innumeracy it’s such an uphill battle to drum basic economic truths into people’s heads. I spent two hours this evening trying to impart the tautological idea that wages are linked to productivity in an economy, which means Indians are a fortiori less productive than Canadians (Canuck: so why are they offshoring everything if we’re more productive?) It was a thankless task, but someone had to run to the sound of the gunfire.

  2. It’s a long time since I looked at this, but they can’t be replacing VAT with a gaming machine duty.

    VAT being an EU tax, so the UK doesn’t have the authority to remove it.

  3. Innumeracy and poor research aside, that article is so un-Guardian it’s unbelievable. She’s arguing against taxing businesses. She’s arguing against a ‘sin tax’ because people should be able to enjoy themselves. She’s celebrating staying in Britain, for heaven’s sake, instead of jetting off to Tuscany or Cuba.

    I can only conclude that the Guardian’s political stance is in fact secondary to their commitment to poorly-researched and numerically-dubious pontificating. But then, which British newspaper isn’t like that?

  4. While old ladies freeze in their beds in winter or live in fear of a knock at their door, to waste an iota of government energy faffing about with the tax on tu’penny pushers is obscene.

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  6. Philip, presumably the regular Guardian editorial team are all in Tuscany for the summer, and the office boy has run out of approved articles and is letting anything in to fill the pages.

    (which rings faint bells – didn’t Saki write a story along those lines?)

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