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Neutral is the word. It means that the tax does not change what's the rational actions vs if the tax was not there. And yes, it's regressive relative to income
by Epa095 2y ago
Neutral is the word. It means that the tax does not change what's the rational actions vs if the tax was not there.
And yes, it's regressive relative to income. Poor people spend all their money on essentials, paying the vat on all their income. Rich people can save most of their money (e.g in stocks), and end up paying a much smaller percentage of their income in VAT.
- noirscape 2y agoIt should also be added that in most EU countries, essentials like food have a lower VAT rate than luxury goods, specifically as an attempt to address this.
- amarcheschi 2y agoDepending on the country, personal care products as well (...) basically, essentials are taxed at varying lower rates in respect to the normal rate
- nemomarx 2y agofairly normal for consumption taxes, right? us sales tax has similar carve outs for food and personal care and meds etc
- plantain 2y agoIs this really true? I observe much more DIY in countries with high VAT's, because your own labor does not have VAT. If I work on my car, and you work on your house, we are both financially ahead than if you had worked on my car, and I had worked on your house.
- lb1lf 2y agoThe taxman thought of that - at least in some jurisdictions. In my native Norway, if you are a professional and do work benefitting yourself, you are supposed to pay VAT on the value of the job you did, even if it was done after hours.
- upcoming-sesame 2y agoThat sounds crazy
- alexanderchr 2y agoMakes me wonder if those also applies to professional chefs and cleaners. And do daycare staff need to declare time spent taking care of their own children?
- Epa095 2y agoNo, it's only for stuff which needs 'special competency'. E.g if you are a plumber then changing gaskets are Ok (because that's something 'anyone' can do), but not bigger stuff.
- Epa095 2y agoKind of but not really completely correct. It's not for professionals in general, but for self-employed professionals. And 'only' for the work which needs special competency. E.g is changing gaskets as a plumber ok, but more serious work triggers VAT. But yeah, pretty lame rule, and I doubt many actually follows it. I think it's primarily meant for people doing house flipping.