A recent comment by Dan Neidle. You know, an actual expert tax lawyer. I paraphrase:
“We don’t have VAT on financial services because no one can work out how to do it. We have insurance premium tax which is very like VAT on insurance because we can work out how to do it”.
Spud just says “VAT on everything except interest!”. Which, of course, immediately means fees get added into the interest rate on everything. And that’s me, a non-expert, on 30 seconds thought. 1 bp on a mortgage interest rate, 5 mebbe, pays some fees, no?
I’ve always thought IPT is one of the dummest taxes politicians could come up with. We want people to take out insurance so why tax it and get less of it?
Just because we can tax something it doesn’t mean we should.
BiND, insurance premium tax made sense when it was first introduced.
Retailers developed a wheeze whereby they started splitting out some of the purchase price of an asset into a bundled insurance. So you’d buy a new washing machine (subject to VAT), but instead of a 3-year guarantee (which would be part of the price and so subject to VAT) it would instead come with a 3-year bundled (so you couldn’t opt out) breakdown insurance (insurance, so VAT-exempt).
So Insurance Premium Tax was initially an anti-avoidance measure that only applied if the insurance was sold bundled with VAT-able goods.
Of course politicians then decided it was a cash-cow, so extended it – with the detrimental result that you point out.
Already ranted on the other thread about this but let’s do it again, because Spud seems determined to prove just how little he understands for a professor of accountancy.
What are “financial services”? Mortgages, pensions, your basic bank accounts, all the boring but vital stuff ordinary people depend on.
So how does VAT work, Einstein? The bank gets to claim VAT back on its inputs, then charges VAT on outputs. But guess what, when you slap VAT on the output, the “service” it’s the customer who pays it. So when I get mortgage advice, or a mortgage, set up a pension or need help with anything financial, I get whacked with an extra 20%, no matter how modest my savings.
“It will only affect the rich”. Like the bank is going to magic up the VAT out of thin air and never pass that cost on to “ordinary people”.
And These days you’re practically forced to get advice before you touch your pension, and now you want me to pay VAT on that too, you utter imbecile!
Yes, the rich use more bespoke financial services but regular people, the ones you’re claiming will not be affected, pretty much have no choice but to use mortgages, pensions, card accounts. your grand scheme hits “ordinary people” exactly at the point where their finances are most stretched, you utter plank!
“you utter plank!”
Phil, join the club…
Phil
To me there’s little doubt his qualifications are either bogus or worthless – he isn’t a professor of anything other than his own ego. His lack of basic accounting knowledge has manifested itself on hundreds of posts and he was booted out by the ICAEW- a feat several denizens on here said was nigh on impossible.
The ‘VAT on financial services’ thing is so idiotic it doesn’t merit comment normally. I think it was mentioned in his preposterous ‘Taxing wealth’ report a tired ragbag of often decade old tropes resurrected which even this government. The worst in human history, has thought was too extreme. No doubt he is an utter moron – the stupidity is baked in.
Certain Financial Services are not zero-rated as Murphy implies – they are “exempt” which means that the financial services company does not charge VAT on its output but cannot reclaim the VAT paid on its inputs.
Imposing VAT on financial services would not be beyond the wit of man but the income to HMRC would be a modest fraction of the headline figures touted by journalists and Labour Party propagandists (but I repeat myself). Apart from the ability of insurance companies to reclaim VAT on inputs, there is the “small business exemption limit” that permits self-employed insurance brokers and consultants to choose whether or not to register for VAT. It will come as no surprise to you (but it may to Rachel from Customer Complaints) that lots of self-employed people sit down and work out how many of their customers are VAT-registered so can reclaim any VAT they charge and how many are not before deciding whether to register for VAT and a few individuals have two parallel businesses.
Surely Spud wants to tax every loan at 20% of the value, and then every loan repayment at 20% of the value.
And after that every payment of salary in to your bank account is taxed at 20% as a financial service. The financial service of paying for something by direct debit, or debit card, is then also taxed at 20%. As is the money going into the recipients account – 20% tax as a financial service.
What could possibly go wrong? There’d be loads of money for the state. Wouldn’t there?