All the smart money is on a cut in VAT next week as the government’s challenged to inject cash into the economy.
In the US tax rebates have been predictably disappointing with less than half spent. Predictably, because if the president says ‘This sucker could go down!’ and that sucker includes your job, putting a little aside may be more of a priority than creating work for others. Over in Taiwan the government’s handing out shopping vouchers, but that’s a little gimmicky.
VAT is an obvious target because it can be cut with very little notice and immediately reduces prices in the shops, people have to spend rather than save to benefit and as it’s a regressive form of taxation that’s harder for poorer people to afford, cutting VAT is a social good.
But if we really need to get people excited a VAT holiday is the way to go with VAT cut deep but for a clearly defined period. Done right the resulting sale mentality will encourage shoppers to bring forward their purchases; upgrading their TVs now rather than later, paying for holidays before the tax comes back and – here’s a big one – enjoying cheaper fuel through the winter. Hell, the shops would need to staff up to cope with demand and everyone’s cash flow would be much healthier by the end of it.
And a nice side effect would be that having gone for the ‘tax cuts should be for life not just for Christmas’ soundbite Cameron would be left fuming that it’s Tory policy that’s attracting the Mickey Mouse jibes.