Tax Break

Who said tax is boring?

Near-Death Of A Salesman

Every one a goer!

Every one a goer!

I  am prejudiced against salesmen. Shop salesmen. Company salesmen. Door-to-door salesmen. You name ’em, I’m prejudiced against ’em. I am not proud of the fact and sincerely apologise to any salesman who, attracted by the pictures or vulgar colours, has found his way inadvertently to this blog only to be insulted for his troubles.  My feelings are not entirely rational. A minor background in macroeconomics instructs me that consumer demand is critical to the future economic health of the world, that asceticism is a luxury only to be afforded by the lucky few, and that it would be an unmitigated disaster were the meek to inherit the earth.  A little, harmless porky from a zealous salesman in Europe can lead to a butterfly flapping its wings at someone pulled out of poverty in the Far East, or something like that.

I do not expect governments to share my prejudice, but events last month made me wonder. No fewer than 8 countries raised their VAT rates on January 1. The intention was noble – aiming to cut spending and raise taxes in order to reduce their deficits; VAT is an efficient weapon in the fiscal armoury, but the timing could not have been more inept. Allow me to explain by way of an example from the University of Life at Finchley.

Once upon a time in May 1984  there were Three Taxbreaks – Mummy Taxbreak, Daddy Taxbreak and Baby Taxbreak. They lived in a quaint maisonette that had been jerry-built 25 years earlier in the post-war building boom. Life was ideallic but for one solitary problem: rising damp. Mummy Taxbreak invited countless (probably two, but the passage of time plays havoc with one’s memory) workmen to try to fix the problem, but to no avail.

Then one evening, as the rain beat down on the porous front wall, there was a ring on the door-bell. Daddy Taxbreak opened the front door  to find a  young Cheshire Cat in a polyester shirt, polyester tie and polyester suit (the shoes were probably imitation-leather plastic) carrying a brief-case and grinning profusely at what had previously been  the closed door but was now Daddy Taxbreak’s face. Momentarily caught off guard by the relief that this was not yet another of those semi-literate missionaries flogging back copies of The Watchtower, Daddy Taxbreak acceded to the cat’s request to come in (it must be remembered that Daddy Taxbreak was 26 years old and had yet to learn the importance of keeping the drawbridge up at all times).

You can make a fortune out of anything these days

You can make a fortune out of anything these days

To cut a short story even shorter, it transpired that the Taxbreaks were not the only Rising Damp sufferers on the estate and the Cheshire Cat’s company was offering a revolutionary approach to the problem where, for less than £200 (an absolute fortune), they could insert little spheres of special material at strategic places in the wall which would absorb and expel the uninvited water. He opened his briefcase to reveal what looked like a Geiger counter (or what Daddy Taxbreak pictured a Geiger counter to look like) and removed a little rectangular electronic device with two sharp pins at one end. Before proceeding to prod the various walls in the main room (“More rising damp may be lurking undetected, sir”) he succeeded in pricking Daddy Taxbreak’s membrane of gullibility (Mummy Taxbreak would later claim that she was never convinced, and Daddy Taxbreak decided to believe her). “I must tell you, sir, that if you sign today, you will be able to avoid the VAT that is going to be imposed from June 1 on house improvements – this is a big saving.” Rising damp was replaced in Daddy Taxbreak’s mind by rising vomit – but he let him proceed anyway.

As he worked  his way around the room  driving his little pins into the wall, watched attentively by Baby Taxbreak, there was suddenly an almighty flash and the Cheshire Cat  was literally thrown backwards across the room against the opposite wall (there was also an almighty  bang, of course). If you are going to jerry-build a house, you might as well go the whole way and, it later became apparent, the main electricity cable had been inserted far too near the surface of the wall which now had an almighty hole in it.  As a result of this incident the Taxbreaks were subsequently able to have the entire maisonette redecorated thanks to an over-generous insurance company that insisted on paying the higher of the two estimates the Taxbreaks provided. What is more, it transpired that the entire problem with the rising damp was caused by a flower bed which the Taxbreaks paid twenty-five quid to have filled in and never caused a problem ever again.

Oh, I almost forgot the poor Cheshire Cat  (How could I?). He lived to darken more front doors. He was miraculously only slightly shaken and, eagerly accepting the offer of a drink by Daddy Taxbreak, was given a hot cup of tea. Seeing him politely off the premises, minus a sale and minus his little rectangular electronic device which was  now well cooked and residing in the kitchen bin, Daddy Taxbreak  pointed out that he was a trainee Chartered Accountant and the expansion of the VAT base on June 1, whilst affecting hot takeaway meals and home improvements, should not stretch to the service he was offering – but nice try and good luck with the next moron.

I assume, dear readers, that you do not need any further explanation regarding the VAT hikes in January, but for the benefit of any salesmen who, armed with an adequate dictionary, have made it this far, I will elaborate.

The French bought millions of these in December to beat the January VAT hike

The French bought millions of these in December to beat the January VAT hike

Since the 2008 crash, governments have had to deal with the potentially contradictory policy imperatives of deficit reduction (reducing government spending and increasing tax take) and stimulating consumer demand which fuels growth and, in turn, increases tax revenues. A great way to get people to spend is to inform them that , in two months time, whatever they are thinking of buying will be more expensive. Whatever they might not have ultimately  bought in two months time, they are likely to buy now and while they are in the mood or in the sights of a good salesman, are likely to buy things they never realised they didn’t need – thus further stimulating the economy. An announced VAT rise, clearly designed in itself to raise revenue, will do more long-term economic good in a depressed, non-inflationary economy if it leads consumers to buy now (one of the reasons VAT rises are generally announced well in advance). So what were Governments thinking when they announced VAT rises for the week after Christmas – the one period in the year when the western world never needs encouragement to spend? They should take a leaf out of Japan’s book. Shinzo Abe’s Government is upping the Japanese  rate in April. On the other hand, they don’t celebrate Christmas.

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