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> income tax, plus employee and employer NICs The other tax that individuals get hit by, that megacorps get to avoid, is VAT. Sure, megacorps pay VAT on their

> income tax, plus employee and employer NICs The other tax that individuals get hit by, that megacorps get to avoid, is VAT. Sure, megacorps pay VAT on their inputs; but they claim them back on their outputs. Individuals spend most of their residual income, so that gets taxed at whatever (20% now?). So individuals end up paying something like 70% tax. VAT is a wicked tax. [Edited] 20%, not 25%.

youngtaff 4y ago
UK VAT is 20% on most of the items it applies to Most contractors are in a position to claim it back if they're also charging it
- Nextgrid 4y ago
  Only claim it back on company expenses. I think what the parent is referring to is that individuals get taxed twice - once when they acquire the money (whether NI via employment, or dividend tax via limited-company self-employment) and then a second time when they spend it because most of what they spend it on includes VAT.
  - denton-scratch 4y ago
    That's exactly what I meant; except that although you mentioned NI, you didn't mention income tax. Dividend is irrelevant - I was referring to individual employees (sorry - didn't make that clear). The government (doesn't matter which colour, they're the same) make a huge deal about income tax rates, tax-free thresholds and so on. Income tax is a smaller part of my tax outgoings than VAT, by a long chalk. (Well, it was when I was earning; now I'm retired, I don't earn income, and nearly all my taxes are VAT).
vidarh 4y ago
While VAT is highly regressive, this does not make sense. Most people spend only a tiny proportion of their income on things subject to VAT. E.g. for starters, the 20% VAT can only at most apply to what you haven't already paid in tax, so in the event of your hypothetical 50% effective tax rate including employers NI as a contractor (which means you'd need to be making around 110k GBP, placing you in the top 2% or so), you're at most spending 50% of your income, in which case VAT will at most add up to an additional 10% tax on your gross income. But in reality, most peoples biggest expensive will be things like mortgage payments or rent, neither of which you pay VAT on, and other major expenses such as a lot of food products, are also VAT exempt. Last time I did the maths for myself, VAT added up to 4% of my gross salary.

youngtaff 4y ago

UK VAT is 20% on most of the items it applies to Most contractors are in a position to claim it back if they're also charging it

Nextgrid 4y ago
Only claim it back on company expenses. I think what the parent is referring to is that individuals get taxed twice - once when they acquire the money (whether NI via employment, or dividend tax via limited-company self-employment) and then a second time when they spend it because most of what they spend it on includes VAT.
- denton-scratch 4y ago
  That's exactly what I meant; except that although you mentioned NI, you didn't mention income tax. Dividend is irrelevant - I was referring to individual employees (sorry - didn't make that clear). The government (doesn't matter which colour, they're the same) make a huge deal about income tax rates, tax-free thresholds and so on. Income tax is a smaller part of my tax outgoings than VAT, by a long chalk. (Well, it was when I was earning; now I'm retired, I don't earn income, and nearly all my taxes are VAT).

vidarh 4y ago

While VAT is highly regressive, this does not make sense. Most people spend only a tiny proportion of their income on things subject to VAT. E.g. for starters, the 20% VAT can only at most apply to what you haven't already paid in tax, so in the event of your hypothetical 50% effective tax rate including employers NI as a contractor (which means you'd need to be making around 110k GBP, placing you in the top 2% or so), you're at most spending 50% of your income, in which case VAT will at most add up to an additional 10% tax on your gross income. But in reality, most peoples biggest expensive will be things like mortgage payments or rent, neither of which you pay VAT on, and other major expenses such as a lot of food products, are also VAT exempt. Last time I did the maths for myself, VAT added up to 4% of my gross salary.