RAPID RESPONSES

The VAT morass

On Monday, you mentioned the reduction of VAT were we to join EFTA [With the Eurozone tottering it may be time we signed up for some Norwegian lessons].

VAT is a typical bureaucrat’s way of raising a tax on sales. It is highly complex and applied to almost every transaction. We have an army of employees, engaged on the totally useless and unproductive work of accounting for VAT received and paid, as it passes from supplier to customer through the production chain. We also have another army, in the form of tax collectors who deal with millions of VAT returns that simply record the collection and payment of essentially the same money.

Before VAT, purchase tax was added to the sale price of goods and services. Vendors who registered with HM Customs & Excise were not required to charge the tax on their sales to customers who were also registered. Therefore, the tax was paid and borne only by the final user. The result was that far less time was required by employees to administer the tax and far fewer tax collectors were required to administer it.

It is time we found a way out of this morass and used personnel to carry out useful productive work as opposed to the repetitive accounting for the same money as it moves from hand to hand.

G Bernstein