Wednesday, August 12, 2015

Airport VAT rip off ? What about ISAs and Pensions then ?

Its Summer and the government has to play the headlines. A bit of obvious popularism has arisen in that air side shops in airports get VAT of their shopping, but charge customers similar or the same prices anyway. Hence the tax break doesn't get passed on to the consumer.

Conservative ministers are making a great song and dance of  instructing retailers to pass on the break ( did that knock Calais out of the headlines for a bit - great ).

But what about the tax breaks for ISAs and Pensions taht seem to just subsadise poor perforance by banks and finaicial instituions ?

I guess George won't be so keen on dealing with those ....


Mark Wadsworth said...

hehe, excellent point.

It's about tax incidence*. Greater minds than mind have shown that ISA interest rates are about a quarter lower than non-ISA interest rates, so the net benefit to the saver is bugger all and the it is the banks who end up collecting the tax break.

* a tax is borne by whichever party is less price sensitive and a tax break or subsidy accrues to the least elastic factor.

A saver can shift his deposits from Bank A to Bank B quite easily, so he is "price sensitive" and banks are a monopoly (quantity supplied is not price sensitive) so any tax on savings is mainly born by banks and a tax break benefits banks.

Mark Wadsworth said...

Bloody awful spelling though.