The UK should not lower VAT rates
Debate Rounds (3)
First round is acceptance
I. What is a VAT?
The VAT, short for "value added tax", is a modern day consumption levy on manufacturers. The government will factor in all the goods or items that went into making a product, and in the UK, will take 20%, 5%, or 0%, of the cost of all those goods. The method for doing this, is a little confusing for many. The "value added" is then factored into the products cost (A method used by sellers in the EU), which leaves the consumer paying the 5% levy.
I wanted to clarify this, as many get very confused when you try to explain VAT's to them.
II. Examples of VAT's
I feel like I still need to give some examples before I begin my arguments. Let's say the materials for a classic radio costs 10$. The government will levy 20% of that item, which in this case, would be equivalent to 2$. The system, in actuality, is 1$ for every 5$ in prices. Here's another example, of one levied at 5%. A canned food item costs 1$ to manufacture, so the government will simply levy 5% of that, and receive .20$.
III. VAT rates explained
20%: Milk, Pop, Alcohol, pornography, or any item not needed for survival.
5%: Sanitation, generator, air conditioning, or items that have importance, but are amenities.
0%: Food, drinks, meat, tools, insurance, or things that are required to grow, live, or are entitled to.
IV. The Average VAT rate
The average value tax is usually pretty low. For most transactions, most people are only paying 5% or 0% for items, although luxury goods cost 20%, these are consumed far less. In addition, citizens aren't even paying the full cost. They are paying that of manufacturing cost, so basically, you can expect to pay about .25$, or no money at all on most purchases.
Like the US, the United Kingdom does not force VAT's on food or basic items, which means the poor are hardly affected under the VAT.
V. Why the UK needs a high VAT
The required VAT rate for all EU nations is 15%, although many nations also used reduced cost VAT's (The EU policy is ridiculous here). The UK actually charges less than the rest of the EU for commonly needed products. The reason the VAT is so important, is because the UK, unlike other nations, has not recovered from the recession yet.
Their economy is growing, and a lot faster than it used to, but it is still very hurt, and government revenue is falling. It needs to recover all the money it lost during the recession, so they can have surplus for the upcoming economic boom. The UK VAT is the third largest source of profit, after the Corporate and Income taxes. With the extra 2.5% raise in the VAT (Highest rate), the UK has billions more being funneled into the economy.
The UK needs to save now, and have that money stockpiled for the next two years. Governments are wise to have large surpluses when the economy is healthy, so they are not forced to tax booms. With the economy on the up, consumption is increasing, and with it, welfare programs that are helping the disenfranchised greatly.
VI. Most people are doing fine with higher VAT's
The UK system for the VAT is a wise one. There are still some qwerks that I think the UK is behind on, and the US model is much better suited for my tastes, but for the most part, it's a good system. The rates are designed to catch people with the extra money to pay VAT's, and the poor who need to preserve it most are targeted the least.
This means the UK is collecting revenue from the right people.
VII. The problem isn't high rates
As I already stated, the VAT's are being used quite wisely. I do concede that there are some problems with certain products. The issue isn't how much were taxing, but what were taxing. I would argue that instead of lowering rates, we recategorize current listings. This way we are helping the government grow and not regressing commonly consumed items.
VIII. A third solution
Simply add another rate. There is no need to lower current rates, when we can simply make a new classification. Preferably at 15%. My point, is that there are more viable solutions to reforming VAT than just lowering taxes, and my opponent must also prove these are not as viable.
1) Economic recovery
While austerity has had a very negative impact upon Britain, it is true that the economy is in slow recovery. The economy did grow by 0.8% in the first quarter of 2014, this marks the fifth consecutive period of GDP growth. With this "growth", I put in quotation marks as most Britons will tell you it is very unnoticeable that we are technically recovering, firstly implies that the UK Government should slowly be entering into a position in which it has recovered its "lost" money and so why can't the VAT return to what was considered the normal rate, which is 17.5%?
2) Is this actually worth it?
VAT at 20% obviously makes everyone in the UK that little bit poorer, but for how much exactly? It is estimated that by 2015, this will grant the government an extra 13 billion pounds each year. 13 billion is by no means a small number, but relative to the costs that the State has to endure, it is a relatively small earning. From 2012/13, the National Health Service (NHS) cost 108 billion pounds. Health as I am sure you are aware, is one of many State provided services. Others obviously including defence, education, security, police etc. Is saving a trivial 13 billion worth it? The government and yourself may argue that every little bit is worth it, but I will now move onto why such a small number is not worth making the population pay.
During the early days of the recession, Labour (the previous party in power) lowered the VAT from 17.5% to 15%. To put this into perspective, the average Ford Focus was cheaper by 322 pounds, a JVC LCD television was down by 12.77 pounds, everything was just a bit (or potentially quite a lot) cheaper. However as you now know, this was increased to 20%, be it, for the reasons you gave, effectively recovering lost money at a time the government was poorer. But as I have stated, 13 billion is rather small and when you look at the ever increasing poverty rate in the UK, it does not seem worth it at all.
In 2006 (two years before recession), the UK poverty rate was lower than that in the US standing at 14%. Now obviously due to recession itself as well as cuts in welfare, this number has risen. But can you deny that higher tax does not also contribute to an increasing poverty rate? The fact that everything is more expensive and although you can state that essentials stand at 0%, that is really for the bare minimum.
To get to the point however, UK poverty now stands at 20%. One in five UK citizens now live in poverty, or roughly 15 million people out of 63 million. The UK now has a higher poverty rate than the US. It is estimated that by 2020, 3.4 million children will be living in poverty. This equals the same level as when Labour first took over from Thatcher, in their 13 year run thereafter, this was reduced to 2.8 million. It is noticeable how the Conservatives have tended to increase the VAT rate while Labour reduce it. Clearly we can see that Labour have had considerable more success in tackling poverty as opposed to the Conservatives.
Poverty though, is still on the rise, throughout the UK. The fact that from 2006 to 2014, poverty has risen from 14% to 20% should be ringing alarm bells. How can we possibly justify such an increase in VAT? You claimed VAT in the UK is lower than other EU nations, correct, but the UK has far greater poverty than many EU nations.
4) Encouraging growth
Austerity has provided for some growth but ultimately unless we provide some incentive for actual growth, much of the population will still struggle financially. If you look generally at British comments on the internet on Conservative policies, you will get the picture, most do not actually notice the apparent growth and recovery. It can only be recognised in statistics. What does this tell you? That the "recovery" is painfully slow, quite potentially not down to governmental action at all and purely coincidental. The whole ideology behind the reduction from 17.5% to 15% was to ease the blow to citizens and to provide growth. But as the UK technically is recovering, should we not now, more than EVER, be encouraging growth? What better way to start than lowering the VAT rate? Even id only by 1% to start with.
But to address your final point. I do not understand. Introduce another rate? Add another tax? How does this help in the slightest?
Sources used: (I should add these as end notes, but as I said, I am tired and so will simply list them here)
I. Economic Recovery
My opponents contention is unclear here. The UK is growing, and it noticeable, but we both agree it is slow. Yet economic trends have shown UK stimuli spending to be very effective lately. Most of the UK is behind on its budgets, and we have to ask ourselves what the next course of action should be. Should the UK dip more into the debt line, or should it strategically target money within its own borders, before having to pay high intrest rates on money it already has? More debt is not the answer to the UK's problem, and there are really two courses of action. Maintain the VAT rate or go into debt? At least taxation doesn't come with a 2% down intrest rate.
II. VAT Value
If the UK were following the VAT methods of other European nations, then they could be making 50 or so billion. The question isn't really how much it is making, but how much we needed. As I showed earlier, the VAT is only applied to luxury goods within the UK, meaning only surplus money is being targetted. 13 billion is a tremendous amount of money though, I think the opposition is understating that. Health Insurance in the UK is in the same boat as the US, with a 21% gdp thing going, but there is a big chunck of unaccounted for budget which must be filled. The UK can decide to target taxes on luxury goods, or go into more debt. As I showed earlier, taking debt grows with intrest, so taxation is the best answer. I also believe 13 billion is more than enough to pay for the UK's much needed and prestigious council towers.
III/IV. Poverty and Encouraging Growth
My opponent is stating that the VAT is causing poverty. He has not gave correlation that it is having this effect on the economy, and as I argued earlier (which were dropped), it is stimulating growth and making the UK more fiscally responcible. Until the opposition can correlate poverty with the VAT rate, this contention has no weight. Likewise, the opposition also tries to make a baseless assertion that the VAT rate is hurting growth as well, while dropping my argument that it isn't.
At most, I will grant him that the VAT is helping very little, but as I stated, it is the best vialble option compared to the alternatives. Can the opposition give a better alternative?
Zylorarchy forfeited this round.
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