Sunday, 13 February 2011

Take VAT - or, where tax justice goes horribly wrong

A new "UK Uncut-esque" action group, calling itself Take VAT, has recently emerged. Where UK Uncut directs its action at tax dodgers, Take VAT has issue with the recent increase in VAT to 20%. However, almost immediately, it has taken entirely the wrong approach.

On Saturday, protesters from the group invaded Heathrow Airport, where they "ran around Terminal 3 ... ‘confiscating items’ such as luggage trolleys and toilet roll." In the first instance, this action was quite simply ridiculous, and the only impression it would have given to onlookers is that of a small bunch of students causing havoc. But it also shows that they have no idea how VAT works.

Take this quote from a spokesperson;
It is simply unfair that aviation pays no VAT. Why should one of the dirtiest and noisiest industries in the world get away scot-free when ordinary people are charged VAT on basic necessities like toilet rolls?
In the Guardian on Thursday, they further claimed that "the biggest companies are getting away with paying nothing" in VAT, and that "that avoidance is costing the public millions." This is simply wrong. It's true that there is more than a measure of unfairness about the tax, but that cannot be addressed by asking that more companies have to pay it.

Value added tax is paid by consumers, not retaillers. Occasionally, shops will offer customers a "VAT holiday," where they absorb the cost of budget increases themselves. But this is a short term gimmick, and ultimately all such increases are absorbed into the price paid by shoppers.

So, if we demand that the aviation industry pays the tax, we are actually demanding that the ordinary people who use its services do. If we complain about HMV and Tesco exploiting a legal loophole to sell CDs and DVDs cheaper, we are complaining about working class people having those goods at a lower price. And all the while the fundamental issue - that VAT has risen to 20% as part of a broader rise in the cost of living which makes it harder for all of us to get by - goes unchallenged.

Even PCS, whose Tax Justice campaign inspired UK Uncut and the message that "there is an alternative" to public sector cuts, states that Tax Justice "mean[s] higher income tax rates for the richest and cutting regressive taxes like VAT and council tax."

PCS argue that closing the £120bn "tax gap," between the taxes due and those collected, would save far more money than the present austerity measures. They argue for investment in jobs over cuts, and for scrapping real waste such as the Trident nuclear missile programme and the war in Afghanistan, which together cost around £4.1bn every year.

On the other hand, all that Take VAT are arguing for - perhaps inadvertently - is the cost of the VAT increase (which goes hand-in-hand with public service cuts) to be borne by ordinary people. Not only is this an argument the public won't sympathise with, it is one that shouldn't be made.