November 13, 2006

That booze tax

When Ed Balls looked forward to the EU playing a greater role in future UK policies, he must have known that the European Court might be about to make customs duties on purchases from other EU countries illegal.

One estimate is that the ruling could cost the Treasury £7bn a year (equivalent to 5p on basic rate income tax).

That's just for booze and fags - but why should it stop there? (Cars, anyone?) And all those long distance deliveries should be excellent for boosting carbon emissions.

So the first tax competition isn't going to come in business taxes, as expected, but in excise taxes. For high value, low volume goods it will pay a small country to have a low rate of VAT, so that purchasers from across the rest of the EU choose to use its jurisdiction, and it gains the tax revenue.

The larger countries will have to make up their shortfalls from direct taxes - or maybe from those useful green ones.

Gordon must be spitting blood. He hates having his autonomy threatened. Much more of this and he'll be calling in Ruth Lea to explain the Swiss solution.


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