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Zero Rate Tax

Forums › FIA Forums › Zero Rate Tax

  • This topic has 4 replies, 3 voices, and was last updated 5 years ago by Avatarmrjonbain.
Viewing 5 posts - 1 through 5 (of 5 total)
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  • May 10, 2021 at 5:26 pm #620237
    Avatarmaximus07
    Participant
    • Topics: 446
    • Replies: 437
    • ☆☆☆☆

    “Mostly essential items are zero rate tax. If they are taxed so will create additional burden to less well-off.”
    What is meant by second sentence here?

    May 10, 2021 at 5:53 pm #620238
    Avatarmrjonbain
    Moderator
    • Topics: 6
    • Replies: 2607
    • ☆☆☆☆☆

    I think it means if they were taxed at normal rate it would increase cost of essential goods such as basic foods to lower income/wealth people. Hope this helps.

    May 10, 2021 at 6:00 pm #620240
    Avatarmaximus07
    Participant
    • Topics: 446
    • Replies: 437
    • ☆☆☆☆

    Thank you Mrjonbain

    May 10, 2021 at 6:34 pm #620247
    AvatarKen Garrett
    Keymaster
    • Topics: 10
    • Replies: 10657
    • ☆☆☆☆☆

    Quite correct. In addition VAT is a regressive tax meaning that it impacts more on less well-off people. If someone spends £1,000 (before VAT) on food in a period. If food were standard rated at 20% then their costs would increase by £200. If the person had a salary for the period of £2,000 then the extra £200 is a lot (10% of income) compared to its effect on someone earning £5,000 (4% of income).

    May 10, 2021 at 8:12 pm #620258
    Avatarmrjonbain
    Moderator
    • Topics: 6
    • Replies: 2607
    • ☆☆☆☆☆

    You are welcome.

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