This seems wrongheaded.
A cut in the VAT (a GST like tax) may have a brief impact on spending but it will not encourage investment or infrastructure development. A better approach would be a cut in income taxes -- but the UK government is increasing income tax.
Well, at the least it shows the seriousness of the economic situation -- and maybe we need to think about some ideas that just a few months ago would not seem right (although in fairness Harper did cut the GST -- I still think that's why we have a deficit now but maybe he was on to something?).
U.K. temporarily cuts sales tax to stimulate spending
In an effort to get consumers spending again, the British government has unveiled plans to temporarily cut the country's standard sales tax from 17.5 per cent to 15 per cent.
The reduction of the value-added tax (VAT) will only be in place for 13 months, Treasury chief Alistair Darling announced Monday.
The reduction in tax is expected to put about US$18.7 billion back into the pockets of consumers -- about 200 pounds (US$300) per person.
"If we did nothing we would have a deeper and longer recession that would cost the country more in the long term," Darling told MPs in his pre-budget report, according to the BBC.
The tax pullback is part of a $20 billion pound (US$30 billion) economic stimulus plan.
Additionally, Darling said the top tax rate for those earning more than 150,000 pounds (US$225,000) will jump from 40 per cent to 45 per cent in 2011.
Story: http://news.sympatico.msn.ctv.ca/abc/home/contentposting.aspx?isfa=1&feedname=CTV-TOPSTORIES_V3&showbyline=True&newsitemid=CTVNews%2f20081124%2fVAT_budget_081124
9 comments:
Hummm I thought this sales tax cutting was such a terrible thing. Now we see a major power like the(U.K.)copying what Mr.Harper and company have done before.
Let us just compare Mr.Harper cuts our sales tax by 2%.Now the U.K.is doing the same by cutting their sales tax by 2.5%,humm a coincidence you say? I think not! Mr.Brown of the U.K.is not someone who you would call a Conservative,now is he?
Here is my problem with the income tax,we do them once a year.Then we have to wait for the rebate money to come in,which would take about another month to come.Also not everyone who would receive this rebate would actually go out and spend it.
Just to let you know that I'm also in favor of an income tax reduction.
Morton, you are the most objective blogger on this site.
The assumption then would be that you are a Ignatieff supporter. If so, great stuff.
RE: The Right is Where it's At
"Hummm I thought this sales tax cutting was such a terrible thing. Now we see a major power like the(U.K.)copying what Mr.Harper and company have done before."
Well except the two cases are completely different.
Harper made his cuts when the economy was humming along and really didn't need the stimulus... consequently picking the faster more inefficient sales tax cut was good politics but bad policy.
The UK is temporarily lowering their sales tax in response to a looming recession + they want to stimulate the economy immediately.
To Merboy:
You said:
"Harper made his cuts when the economy was humming along and really didn't need the stimulus... consequently picking the faster more inefficient sales tax cut was good politics but bad policy."
Common now Merboy the same people who criticized the cuts to the GST would be criticizing it now. You know and I know it.
You also said:
"The UK is temporarily lowering their sales tax in response to a looming recession + they want to stimulate the economy immediately."
Thanks for making the point that lowering the sales tax would stimulate the economy.
Now I don't this is the only factor,but why do you think that our economy is doing much better then other countries? Is it just possible I mean just possible that this government had something to do with it humm?
Sorry correction:
I meant to say "Now I don't thing that this is the only factor,"
Not:
"Now I don't this is the only factor"
The Right is Where it's At said...
"Common now Merboy the same people who criticized the cuts to the GST would be criticizing it now. You know and I know it."
We'll see what economists think of a temporary sales tax cut in the context of fighting a looming recession soon enough... regardless... we're talking about two very different situations... but you can continue to pretend they're identical so long as it suits your partisan interests.
"Thanks for making the point that lowering the sales tax would stimulate the economy."
Thanks for re-framing the criticism of Harper's GST cuts... I don't remember hearing anyone saying it would have zero impact on the economy... economists were saying that it was a costly and somewhat inefficient way of promoting growth in comparison to other options available to the government at that time.
"Now I don't think that this is the only factor, but why do you think that our economy is doing much better then other countries? Is it just possible I mean just possible that this government had something to do with it humm?"
Our economy was doing much better than other countries before the Conservatives arrived in Ottawa... so no I don't have much trouble thinking they had little to do with our current situation.
I believe that we wouldn't even be looking at a recession in this country if the Conservatives hadn't drastically increased spending and blew $12 billion per year on the wasteful GST cuts.
To Merboy:
You said:
"I believe that we wouldn't even be looking at a recession in this country if the Conservatives hadn't drastically increased spending and blew $12 billion per year on the wasteful GST cuts."
You must be kidding.If every other countries with much bigger economies are about to go into a recession if they are not in already,you don't actually thing that Canada would have been saved from it?"HA! That's a laugh!
Reason why the $12 billions are gone:
1)The Conservatives had to rebuild our Military.It was embarrassing to see the sorry shape that the Liberals left our forces when they left office.
2)They have increased the cash going towards the provinces.
3)They the Conservatives have also lowered tax's in the billions.
You Liberals think that the billions we send to our government actually belong to the government,we Conservatives think it belongs to us the tax payers.This is why your Liberal party has been regressing in votes and MP'S.Well that is your problem. I totally disagree with your opinion even if I respect it. Have a good evening.
RE: The Right is Where it's At
"You must be kidding.If every other countries with much bigger economies are about to go into a recession if they are not in already,you don't actually thing that Canada would have been saved from it?"HA! That's a laugh!"
So when economic experts talk about a deficit that is lower than the $12 billion per year GST cuts they're just full of it I suppose?
"The Conservatives had to rebuild our Military.It was embarrassing to see the sorry shape that the Liberals left our forces when they left office."
There were a lot of cuts made to balance the budget in the 90s... maybe you would've preferred years of deficits?
Also... I do believe the 2005 Liberal budget increased spending on the military.
"They have increased the cash going towards the provinces."
Increased provincial transfers... great if you can afford them.
"They the Conservatives have also lowered tax's in the billions."
Tax cuts are also great... when you can afford them.
"You Liberals think that the billions we send to our government actually belong to the government,we Conservatives think it belongs to us the tax payers.This is why your Liberal party has been regressing in votes and MP'S.Well that is your problem. I totally disagree with your opinion even if I respect it. Have a good evening."
I have never been a member of the Liberal party... and I have only voted for them a few times... the only party I would never vote for is the regressive Conservative party we currently have in Ottawa.
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