Personal Blogs

The government have managed to annoy a lot of people again, this time by saying that paying people cash in hand as a way of avoiding VAT is morally wrong. To be told that by a politician who has not only claimed vast amounts of dubious expenses at taxpayers' expense to pay for his own taxes, but also been heavily involved in tax avoidance himself, is bad enough. It is worse when his boss, George Osborne, obtained his own unearned millions through a trust fund, a sneakly little ruse to avoid paying inheritance tax.

But that's not really the point I want to make here.

What I find most hypocritical about this is the way the government treat different kinds of tax transactions differently, depending on whether they're the kind that affect the rich and powerful or the ordinary citizen. We recently saw George Osborne get rid of the 50 p tax rate for the highest earners. The rationale for that was that if you set taxes too high, people just find ways to avoid them. The solution, then is to reduce the tax rate.

Guess what? That's exactly what happens with VAT. Paying 20% on top of every transaction is a lot of money, and people find ways to avoid it, like paying cash in hand. So why does the same consideration not apply? Could it be because the 50 p tax rate only affects George Osborne's chums, but struggling to find an extra 20% on top of everyday expenses affects ordinary people?

One can only speculate.

But one final thought. We are in a deep recession. We need consumers to spend money on things to recover from the recession. If everyone saves every spare penny, demand in the economy will remain depressed, and the recession will continue.

So why do we have such a high rate of tax on spending our money?