Sunday, September 6, 2009

"Shopping receipts to expose stealth taxes"

The Sunday Times features a piece today suggesting that shop till receipts could soon include a detailed analysis showing all of the taxes paid by the business. This would include employers' NICs, business rates, landfill taxes, tax on business profits, climate levies as well as, presumably, road fund licences, import duties and anything else that the business owner fancies.

VAT vs other taxes
At the moment the only tax figure shown on receipts is the VAT that is ADDED to the charges levied by the business owner. VAT is easy to calculate as it's simply 15% (soon to be back to 17.5%) of the charges. It's a tax on the value of the goods and services provided. And it's collected on behalf of HMRC (the taxman) .

I'm sorry but the suggestion that any of the other taxes paid by the shop could be shown on the receipt is quite fanciful. Although if it were to happen I could see plenty of work for accountants to help with the necessary calculations.

Could it be done?
The report, titled, "Shopping receipts to expose stealth taxes", suggests that more than one business is doing this. Er, I don't think so. And even if they wanted to do so they would be making up the numbers.

Too many assumptions would be required to make this 'plan' happen on a widespread basis. It's just not possible to identify how much of the taxes paid by a business relate to each sale they make - at least not until after the end of the year when you know how many sales have been made and how many expenses and taxes have been paid. Then you could work backwards and show how much of each bill represented raw materials, staff costs, overheads, tax and profit.

Business benefits
Despite my reservations I do like the idea that businesses might want to do this.

Before totally dismissing the concept let me highlight one positive consequence that such an approach might deliver. That is to encourage businesses to focus on their gross margin and their overheads. Not all businesses are aware of these key metrics when setting their prices. As a result they make smaller profits than they had hoped for - or even end up with losses and possibly a failed business.

It's not that easy
After suggesting that Avanta and British Gas are considering introducing such a system the report does then concede:
"However, while Vat is a uniform 15%, critics point out that the amount paid by companies in other levies, such as corporation tax, depends on their profits, making accurate calculations on receipts difficult".
In my view, it wouldn't just be 'difficult' it would be close to Impossible - unless you include so many assumptions as to make the receipts little more than a PR stunt. And that's what this report is based on - and a successful one too I'd suggest. So well done to Michael Van Clarke, who claims to be leading the 'protest'. Just so long as no one seriously expects to see these detailed receipts appearing in shops any time soon.

1 comment:

  1. Finally someone has got it, but no surprise that it is not an economist. Any tax on production, whether on employers or the employed in the supply chain, is mirrored as a cost to the consumer. Employers and the employed are merely involuntary tax collectors taking money from consumers and passing it on to government. Effectively, this produces a general tax on consumption that we pay out of our real disposable income when we spend, and no one escapes it, rich or poor. Consequently all current taxes are equivalent to, and could be replaced simply by, a single rate of VAT or retail sales tax, and the huge tax industry could be put to more productive use allowing entrepreneurs to flourish.