Wednesday, 9 May 2012

How to make GST look good

Just take a look at the U.K.'s VAT.

This is from Kiwiblog:
Ruth Porter writes in the Telegraph:
Today the pasty is fighting back, but it shouldn’t be. For years it has enjoyed a special exemption and privilege which it should never have had. Companies and consumers of hot pasties have benefited unfairly while fish and chip shop owners and consumers who preferred pizza have had to pay more. Through a strange anomaly bakery goods were exempt from VAT, the Budget changed that, but today Cornish MPs are objecting to the change. Other MPs are now complaining about another reform which will see certain types of caravans subject to VAT as well. …

Britain’s VAT system is a mess, with arbitrary exceptions all over the place. In recent years this has led to absurd legal battles over whether Pringles are crisps and whether Jaffa Cakes are cakes or biscuits.

A report from the think tank Reform showed how inefficient the current zero and reduced rates are. Citing evidence from the OECD and looking at how our system is one of the most complicated in Europe. They suggested exemptions total more than £30bn. This £30bn could be given back to people in more efficient tax cuts. …

Other countries like New Zealand manage perfectly well with a much simpler GST system. We should follow their example.
For a tax like GST the rule that says you have one rate on basically everything is a good rule. When you have multiple rates applying to different goods you get the kind of mess noted above. For tax, simple is good.

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