Keep the tax system lean
By Francesca Lagerberg
Tax is a very blunt instrument and it is very difficult to get people to stop doing something simply by forcing them to pay more for it.
I am totally in favour of encouraging people to pile ‘veggies’ into their shopping trolley rather than cakes and crisps, but I remain unconvinced that this is best achieved using the tax system.
I suspect people would respond better to clear and well-targeted explanations about the benefits of eating healthily, rather than finding that tax in some form had been slapped on whatever was defined to be ‘unacceptable fatty food’. After all, people prefer carrots to sticks.
Politicians have tried using the tax system to persuade people to act in a certain way in the past – generally with little success.
Does the tax on tobacco stop people from smoking? Any fall-off in nicotine usage appears to stem more from health awareness and a cultural shift in our attitude to smoking.
Similarly an increase in excise duty on alcohol may encourage you to switch to a cheaper bottle of wine – or to get on a ferry to France – but it takes something more persuasive to change people’s drinking habits.
Tax is good for raising and channelling money. Income tax, for example, was introduced as a temporary measure in 1799 to help fund the Napoleonic Wars. But tax is far less effective as a tool for social engineering. Take the introduction of the tax credit regime.
This is inspired by the excellent intentions of helping people get back to work and alleviating child poverty. You cannot fault the aims, but when you consider the burdensome administrative system, the tortuous rules and the related costs of setting up and running the system, you cannot but question how effective it has been.
There are far simpler ways of giving money to needy families, the well-established child benefit system being one or an increase in the personal tax allowances.
So use the tax system for what it’s meant for – raising money – and not for social change.
- Francesca Lagerberg is national tax director at Smith & Williamson
Sweet tooth may save Treasury
By Victor Dauppe
After floating the idea of a fat tax in the press, the government is now keen to distance itself from such a proposal. The concept has provoked a mostly negative response, with the public and media regarding it as interference from a so-called ‘nanny state’.
But is the idea really so ludicrous? We all know that the chancellor desperately needs to fill a £37bn hole in the public finances, and will be looking for the easiest way to raise a considerable amount of revenue.
Moreover, the idea of using taxes to affect people’s behaviour is well established. We have the congestion charge, duties on tobacco and alcohol, and a whole gamut of similar taxes.
Would a tax on fatty foods be all that different from the high level of taxes paid on every packet of cigarettes? Of course, as in the case of cigarettes, a fat tax may not act as a deterrent, but it would become the source of a great deal of revenue.
The introduction of a fat tax could take a number of guises. One method might be to charge VAT on foods based on a particular criteria, such as fat content. An alternative would be to introduce an excise duty on particular foods, as is the case with tobacco and alcohol. We could look forward to Chocolate Bonded Warehouses and the Calais Crisp Cruise. Finally, perhaps, the NHS could levy charges based on an individual’s body mass index – quite literally a tax on the fat.
The simplest option would be a VAT charge at the point of sale on items with a high fat content. It would take a few months for food retailers to adjust their systems to recognise the varying levels of VAT on different items for sale. But this would not be so unusual. In the past VAT has been charged at three different rates in the UK, and other EU countries commonly have four rates of VAT.
But will people really change their behaviour based on the introduction of a fat tax? Experience says not. Chocolate was originally zero-rated as food and was only upgraded to the full VAT rate on dental health grounds.
This has not significantly altered chocolate consumption. People have always gone to hell in their own way.
- Victor Dauppe is tax partner at MacIntyre Hudson.
Crowe Clark Whitehill , the top 20 accountancy firm, has announced the promotion of Chris Mould to partner
The latest opinions from Accountancy Age on Making Tax Digital, and outline plans to evolve the UK's corporate governance regime
Five million taxpayers are ow using digital personal tax accounts (PTA) as part of the making tax digital strategy, HMRC said
UK-based non-doms have paid ten times more tax than the average taxpayer, raising concerns over the Brexit impact on non-dom contributions and therefore, the economy