L'Ombre de l'Olivier

The Shadow of the Olive Tree

being the maunderings of an Englishman on the Côte d'Azur

17 June 2007 Blog Home : June 2007 : Permalink

VAT a load of rubbish

The excellent Tim W has been reading the Observer and seeing how it gets terribly worked up about other people's money. This is not, of course, a surprise to anyone. The Observer and its weekday stablemate the Grauniad are always upset with the idea that people other than news colmnists should earn lots of money and seem to think that everyone should be taxed at 100% of income and then given a little tax credit by G Brown Esq to let them live. However today's leader states, as Tim reports, that:

[...S]ome of the richest businessmen in Britain pay less tax than the people who clean their offices.

Even if we accept that (somehow) our rich business man manages to avoid income taxes and capital gains taxes and our cleaner fails to claim all those wonderful tax credits etc and actually pays all the tax he can on his minimum wage pay this statement is wrong. It is wrong because the rich man will be paying VAT on many of his purchases as well as stamp duty, council tax and so on on his residence(s), excise duty on the petrol he puts in his sports car, excise duty on the champagne and cuban cigars he gives his guests at parties and so on. Simply concentrating on the VAT proves that the rich man pays more taxes: if our plutocrat blows £100,000 of his earnings on products/services where VAT can be applied he will have paid £17,500 to the tax man. This is likely to be more than the cleaner earns in a year and hence far more that said cleaner pays in tax. Oh and the £100,000 of expenses? how likely is that? well we look at article number two

Houses are knocked through, reinforced, secured against all disaster and hollowed out to accommodate gyms, music studios, swimming pools, dens, movie theatres and technology-rich kitchens, the inside of which the owners do not see from beginning to end of day .The walls are covered in high-value art.

Of course some of this will be VAT exempt but most of it won't and that, along with "lesser fortunes for estate agents, art dealers, wine dealers, restaurateurs, jewellers and anyone who offers a service or an item to sell that is in limited supply" is why London and the UK benefits from having loads of bloated plutocrats residing there even if they don't pay the 99% income tax that our socialist friends seem to think is appropriate.