VALUE ADDED TAX: A DIRECT CAUSE OF UNEMPLOYMENT AND WASTEFUL CONSUMPTION
Notes on the PROOF
It’s as simple as A B C D (see diagram)
See also annotation *3 on page 5 of the Appraisal.**
† For “zero rated” supplies (D) is negative and the tax (T) on the product is zero. However, the above formulae hold true in all cases and the unemployment/wasteful consumerist effect is in direct proportion to the net overall revenue received by H.M. Customs & Excise.
‡ Output price (S) will. of course, include the costs of administering VAT as well as VAT itself. These costs are, in turn, rolled into Ax thereby compounding the adverse effects.
** The Appraisal is available on request A5, paper cover £5, post paid. A4, card cover £20. post paid
¶ This incentive will vary as the VAT rate (currently 17.5% in U.K.) and although part of the tax is a tax on profits, this also squeezes margins in a way that has a similar effect. It must also be remembered that profits are another form of income. While there are other tax rules, e.g. capital allowances, which may offset the effect, consider that many capital projects are aimed at increasing “productivity”, i.e. displacing labour. It is fair, therefore, in this proof to disregard capital effects overall.
UNITax (see figure below) in relation to the figures in this proof, falls net on B. i.e. a complete reversal of the VAT effect. This, notionally, doubles the difference by removing approximately 15% from labour costs and adding 15% to resource costs. A staggering 30% incentive to employ people and save resources: just on the transformation ("inversion") of VAT. Consider the further removal of direct employment taxes and it becomes clear how the claims made for the Resource Economics Proposition can be justified.
Abstracted from the proof first issued 12th. April, 1983 by Bradbury Controls Ltd.
© Farel Bradbury MCMXCVIlI. Reissued May, 2007.
N.B. UNITax is levied only once and only from primary source (see national flow diagram) however the already embodied UNITax cost will enter at every stage in the supply chain. The diagram shows the total net consumption.