4 ms·

It is not complicated to me: - food, books, medicine, ... -> lower VAT - cars, luxury items -> higher VAT

spacemanmatt 11y ago
This is a dramatic over-simplification that ignores what is actually a cascade of exemptions that leads toward a similar tax-law morass that we already have.
vidarh 11y ago
Now, define "luxury items", while considering e.g. that in the UK there's VAT on things like tampons (though at the reduced 5% rate), while e.g. imported luxury meat is zero-rated because its food. It's an incredibly complicated tax to apply, because the rules tend to grow to deal with more and more corner cases. For example: Are jaffa cakes cakes or biscuits? It took a lengthy court case to determine that they are in fact cakes for the purpose of UK VAT [1] [2]. The reason for this case was that cakes are exempt from VAT as food no matter what, while biscuits are zero-rated in the UK only if they are not covered in chocolate. In the latter case they are considered confectionery, which is standard rated. Here's more on the complexities of this classification [3]. [1] https://en.wikipedia.org/wiki/Jaffa_Cakes#Categorisation_as_cake_or_biscuit_for_VAT https://en.wikipedia.org/wiki/Jaffa_Cakes#Categorisation_as_... [2] http://www.hmrc.gov.uk/manuals/vfoodmanual/VFOOD6260.htm http://www.hmrc.gov.uk/manuals/vfoodmanual/VFOOD6260.htm [3] http://www.hmrc.gov.uk/manuals/vfoodmanual/VFOOD6200.htm http://www.hmrc.gov.uk/manuals/vfoodmanual/VFOOD6200.htm
- StreamBright 11y ago
  I agree with you, when it comes to applying law to real life it is usually lengthy and pricey process. We should just use a better legal system where these things are not up in the air. You can complicate life with broken legislation, just to keep lawyers busy. You could also just ask: do we need a lawyer to determine that jaffa cakes are cakes or biscuits, or we can pick one and go with it. On the other note on VAT categories: how about collecting data and letting machine learning decide what is a luxury item? We have excellent clustering algorithms that can find clusters in data human has no chance to find. Lets apply that to purchasing habits and figure out what sort of clusters we have out there, and lets decide how much VAT you pay based on that.
  - pm90 11y ago
    The second part is an interesting idea, but I would be wary of using AI for deciding taxation rates. But maybe I'm old fashioned :).
  - SilasX 11y ago
    Laws are supposed to be somewhat stable though, so having to update tax systems based on evolving patterns of what rich people are doing kind of breaks that.
- peteri 11y ago
  The classic UK example is dried fruit. If it's bought in the cake decoration department it's 0% VAT, from the home brewing department 20% VAT. Also for some items such as gift baskets the food is 0 rated but the basket/bowl is rated at 20% and the VAT is proportionally allocated. (I can't remember if it's cost or sales price)
qznc 11y ago
Another advantage is that most people don't have to file taxes anymore. VAT is handled by companies. Personally, I think we should also tax land owners. Likewise, this does not affect most people.
SilasX 11y ago
Now, fend off the numerous attempts to have goods moved to a different category. We have enough trouble with "prepared food is taxed but raw food isn't".

This is a dramatic over-simplification that ignores what is actually a cascade of exemptions that leads toward a similar tax-law morass that we already have.

vidarh 11y ago

Now, define "luxury items", while considering e.g. that in the UK there's VAT on things like tampons (though at the reduced 5% rate), while e.g. imported luxury meat is zero-rated because its food. It's an incredibly complicated tax to apply, because the rules tend to grow to deal with more and more corner cases. For example: Are jaffa cakes cakes or biscuits? It took a lengthy court case to determine that they are in fact cakes for the purpose of UK VAT [1] [2]. The reason for this case was that cakes are exempt from VAT as food no matter what, while biscuits are zero-rated in the UK only if they are not covered in chocolate. In the latter case they are considered confectionery, which is standard rated. Here's more on the complexities of this classification [3]. [1] https://en.wikipedia.org/wiki/Jaffa_Cakes#Categorisation_as_cake_or_biscuit_for_VAT https://en.wikipedia.org/wiki/Jaffa_Cakes#Categorisation_as_... [2] http://www.hmrc.gov.uk/manuals/vfoodmanual/VFOOD6260.htm http://www.hmrc.gov.uk/manuals/vfoodmanual/VFOOD6260.htm [3] http://www.hmrc.gov.uk/manuals/vfoodmanual/VFOOD6200.htm http://www.hmrc.gov.uk/manuals/vfoodmanual/VFOOD6200.htm

StreamBright 11y ago
I agree with you, when it comes to applying law to real life it is usually lengthy and pricey process. We should just use a better legal system where these things are not up in the air. You can complicate life with broken legislation, just to keep lawyers busy. You could also just ask: do we need a lawyer to determine that jaffa cakes are cakes or biscuits, or we can pick one and go with it. On the other note on VAT categories: how about collecting data and letting machine learning decide what is a luxury item? We have excellent clustering algorithms that can find clusters in data human has no chance to find. Lets apply that to purchasing habits and figure out what sort of clusters we have out there, and lets decide how much VAT you pay based on that.
- pm90 11y ago
  The second part is an interesting idea, but I would be wary of using AI for deciding taxation rates. But maybe I'm old fashioned :).
- SilasX 11y ago
  Laws are supposed to be somewhat stable though, so having to update tax systems based on evolving patterns of what rich people are doing kind of breaks that.
peteri 11y ago
The classic UK example is dried fruit. If it's bought in the cake decoration department it's 0% VAT, from the home brewing department 20% VAT. Also for some items such as gift baskets the food is 0 rated but the basket/bowl is rated at 20% and the VAT is proportionally allocated. (I can't remember if it's cost or sales price)

qznc 11y ago

Another advantage is that most people don't have to file taxes anymore. VAT is handled by companies. Personally, I think we should also tax land owners. Likewise, this does not affect most people.

SilasX 11y ago

Now, fend off the numerous attempts to have goods moved to a different category. We have enough trouble with "prepared food is taxed but raw food isn't".