Who pays VAT?
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Interesting report, that I’m parking here, on the effect of abolishing VAT on ebooks (Short story, the cut didn’t get passed on to consumers): this confirms our theory that value is determined in production, and any VAT is just a cut of the profit, not an increase to the natural price.
I need to read in detail, but….
There is a good discussion of indirect taxes as VAT is in an article that appeared in the Socialist Standard in May 1912:
“What Determines Prices
The price of an article is immediately regulated by the demand for it and the supply available. But these ups and downs are but the result of the higgling of the market, and the price always hovers round a certain centre. How is this basic price, this mean of the fluctuations, fixed ?The answer is, by the amount of human energy needed to produce the articles under modern methods. Prices change, they rise and fall without relation to taxation.
We are often met by questions like the following. “Did not the price of sugar rise owing to an increased tax upon it ?”
As a matter of simple fact the rise in prices, and also their fall, are to be explained upon every other ground but that of changing taxes. Questions like the above presuppose that the capitalists can charge what they like, but actually they are governed by economic laws just like any other section of society. The sugar tax is a case in point. In 1908 the tax on sugar was reduced from 4s. 2d. per cwt. to 1s. 10d. Did the price of sugar fall ? It rose as much as ½d. per lb. almost immediately. Even our befogging Liberal Party had to admit this, for Arthur Sherwell, M.P., comments on it in his “Four Years of Liberalism.”
1902 Sir Michael Hicks Beach imposed a tax of 1s. per quarter on wheat, but instead of the price of bread rising generally, a rise was the exception. The Budget of 1909 provided a good instance of the truth of our view. At first the brewers and publicans relied upon the campaign of the Licensed Victuallers Protection Association, who bitterly denounced the taxes. When that failed to achieve their purpose, flaring posters annouroed to the working man that “Your beer will cost you more.” A thinking worker might well ask himself the question : “Why do they fight the proposed tax if it is merely a matter of shifting it on to the working-man consumer by raising the price ?” And as that very agitation showed, they merely use the increased taxation as a pretext for getting an increased price.
With all “indirect” taxation you find the same feature. The brewers and publicans, like all other capitalists, get as much as the market will bear. When additional taxation is levied they use that to test the market. When they found that the working class could not really afford to pay the taxes, or, in other words, the demand for liquor dropped, they went back to the old prices—a practical proof of the Socialist theory. With tobacco the same thing exists. Many firms, such as Wills, announced that despite the Budget tobacco duties, their prices would remain,the same. With some brands of proprietary articles, of course, prices have risen for the Budget happened to afford a fine excuse for raising their prices.“
The full article can be found here:
YMS, the link you gave doesn’t work. Is this what you were referring to:
That cutting VAT did not lead to a fall in price would mean that it was being paid by the profit-seeking companies selling e-books.
This will be the case generally with businesses charging what the market will bear irrespective of any tax on what they are selling.
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