End Is Near For The Paper Tax Disc

[TheDutyPaid]

From this Wednesday 1st October, the DVLA will no longer issue tax discs and when you buy a car you wont have any benefit of tax left to run.

If you sell a car say in June with the tax running out at the end of August you can get two months money back, but will lose the cut for June. But the person buying the car will have to tax the car from June, so the Gov gets double the money for that month.

So from Wednesday, are you going to remove the tax disc and it's holder, leave it till it runs out or like me put a nice picture in the holder?

Also funny if you look online or ebay, there are still lots of people selling tax disc holders.

https://www.gov.uk/government/news/vehicle-tax-changes

[wasabi]

Good riddance - they were a real pain on the motorbike. Had to wrap the paper thing in clingfilm about 3 times to stop it getting wet. Although allegedly some people used a colour photocopy after the original got nicked a few years back.

Now the government just needs to get rid of the tax entirely now that it is a green tax rather than a road fund. They already put huge taxes on fuel so why make us pay twice?

[Saracen]

....

Now the government just needs to get rid of the tax entirely now that it is a green tax rather than a road fund. They already put huge taxes on fuel so why make us pay twice?

Because they can.

Because motoring is close to the ultimate price-inelastic 'good', which any economist will tell you makes it an ideal candidate for taxation when the objective of that taxation is revenue raising rather than behaviour modification.

Because with a debt, and deficit, the size of the one we've got, eliminating them is high national priority, if not the national priority. Which means, if they scrap one extremely lucrative tax, they either have to raise that money by taxing something, and someone, else or explain what "services" are going to be cut or scrapped that it was funding. And either cutting services or raises taxes 7 months before general election isn't something any politician with an IQ higher than a raisin would contemplate.

See, people feel ripped off by road tax, so politicians won't get much, if any, credit for scrapping it because people will assume it's just their right, at long last. But you scrap some services or raises other taxes to compensate and they sure will get the blame.

Cynic?

Moi?

Surely not.

[peterb]

There is an argument that says green taxes are self defeating. Rising taxation forced car mfrs to develop more fuel efficient car - so less fuel is consumed (good for motorists), but revenue falls (bad for governments. Higher taxation sdoes not necessarily mean higher revenue in the long term, Miliband, take note!

[Knoxville]

Never paid for one so for me it's just five minutes less time that I have to spend on the DVLA website once a year

[wasabi]

See, people feel ripped off by road tax, so politicians won't get much, if any, credit for scrapping it because people will assume it's just their right, at long last. But you scrap some services or raises other taxes to compensate and they sure will get the blame.

Road tax USED to be one of the few taxes taxpayers actually understood. Pay the tax, get potholes fixed. Then it got derailed by the green agenda and pushed aside by the fuel tax escalator so it now simply doesn't make sense. Which is doubly frustrating when I literally HAD to sell my old motorcycle due to the ridiculous number of local potholes and replace it with an 'offroad' bike to get from A to B. Despite paying more tax for my non-congesting and non-road-damaging vehicle than some supposedly green mini-diesel cars spewing horrific amounts of carcenogenics into the atmosphere. Arghh!

[TheDutyPaid]

Never pay vehicle tax ever again and buy a pre 1973 car, also if it is before 1960 you don't have to get an MOT.

[Saracen]

Road tax USED to be one of the few taxes taxpayers actually understood. Pay the tax, get potholes fixed. ...!

Well, I'd have said people thought they understood it, thought that was the relationship.

[TheDutyPaid]

Well first day of no paper tax discs and not being to transfer them to the new owner. The DVLA website has crashed all day https://www.gov.uk/tax-disc

Looked at cars today on ebay and new adverts are still saying tax till a month in the future, wonder how many people who bought a car today drove with out tax. So a few weeks later after the seller has sent off the V5 the police be pulling over people for no tax even though there is a tax disc with months left to run in the window.

[RobbieRoy]

Well, just to change tack a tad, forgot to tax my kid's little run around (sitting idle now she's gone off to uni), got a reminder in the post - use website or phone with the provided reference number. Went on line and must say, very simple and quick. That said - will need to go a and sell it this week as just can't justify tying up resources on an unused and depreciating asset (not that you can depreciate a £400 Corsa much!).

As for the argument that the use of tax doesn't alter behaviour - where's the evidence? It's similar to that right wing or neo-liberal argument that all government action is inefficient and it would be more efficiently done if the private sector did what it did instead - there's actually precious little evidence to back up the claim.

But what's new - opinion trumping fact?

[Saracen]

.... That said - will need to go a and sell it this week as just can't justify tying up resources on an unused and depreciating asset (not that you can depreciate a £400 Corsa much!).

....

You might be surprised. If it's left unused for long, you can depreciate it from £400 to £0 pretty quickly. Or at least, to scrap or 'break for spares' value. About the one thing most modern cars REALLY don't like is standing, unused. You'll get brake corrosion pretty quickly, and if it gets to needing new discs, at £400, it'll probably be uneconomic to repair, hence £0. And of course, without use to get oil circulating, you risk bore corrosion, gearbox issues and all sorts.

I'd strongly advise either using (and taxing, etc) it from time to time, or getting rid, if she won't use it while at Uni. Unless she takes it to uni ..... unless it's one that won't allowher to, like Cambridge (or they didn't allow it in my day anyway).

[Saracen]

....

As for the argument that the use of tax doesn't alter behaviour - where's the evidence? It's similar to that right wing or neo-liberal argument that all government action is inefficient and it would be more efficiently done if the private sector did what it did instead - there's actually precious little evidence to back up the claim.

But what's new - opinion trumping fact?

Well, there used to be evidence, but I haven't looked in recent years. It all comes back to the elasticity argument. Where demand is price-elastic, taxation can alter behaviour because it alters price. These taxes are good for behaviour modification but lousy for revenue raising. Where demand is price-inelastic, taxes are good for revenue-raising because that inelasticity means behaviour won't change.

I have studied stats and research papers on this, but don't ask me for links because this was in the days where doing so meant hours in the reference section of the uni library and if you'd said "internet" people would've said "inter-what?" and links were either something on a golf course, in a bike chain or that sausages came in.

[RobbieRoy]

I have studied stats and research papers on this, but don't ask me for links because this was in the days where doing so meant hours in the reference section of the uni library and if you'd said "internet" people would've said "inter-what?" and links were either something on a golf course, in a bike chain or that sausages came in.

And a computer was a 'mainframe' that you had to book time at a hour a go in the Uni computer building, to sit at a terminal to type logical arguments in fortran, or something equally arcane, simply to paginate a page of data to come chattering out of the printer the size of a washing machine!

[Saracen]

And a computer was a 'mainframe' that you had to book time at a hour a go in the Uni computer building, to sit at a terminal to type logical arguments in fortran, or something equally arcane, simply to paginate a page of data to come chattering out of the printer the size of a washing machine!

Not far off. Yeah, I did Fortran but mostly, COBOL and Algol. Data input was mainly via batch job on punch cards. And washing machines were smaller than that.

Nonetheless, neither the economic principles nor human nature have changed much, and price elasticity is still a central tenet of the design of fiscal policy, simply because you have to predict the revenue-raising effectiveness of a policy if it's to stand a prayer of having the desired effect.

Of course, in the terms portrayed, just looking at price-elasticity is simplistic and the real world is never, EVER that, when it comes to economics. Firstly, people aren't all the same (in the degree to which they're price elastic). If you hike the price if cigarettes, many people will just pay it, but for others, either budgets determine that they cut back, or for others, it'll be the final straw and they just up and quit, meaning the Exchequer not only doesn't get increased revenue from them, but loses that that it already was getting. So now you really need an actuary to break it all down, and see what effect a given change is likely to have re: either the status quo, or some other considered change.

But there's one obvious example of tax policy changing behaviour, and that's Labour's 1960's policy of bleeding the rich not just with very high marginal rates of income tax, but with an investment income surcharge (IIS) leading to an effective 98% marginal rate on unearned income. It was supposed to cause the very rich to pay more, but they forgot, or failed to understand, the behaviour-modifying effect.

A central theme of investment is risk, and the potential risk versus projected profit is a major factor in deciding whether to make a given investment. And if you hit that profit with a 98% marginal rate, there is a huge disincentive to invest, indeed to do anything at all that would attract that marginal rate. So, investment collapsed, and a dismaying portion of the very wealthy modified behaviour by leaving the country, so not only did investment drop and the economy suffer, but so did tax revenue. The basic Laffer curve might be overly simplistic, but the principle is sound.

[RobbieRoy]

Of course, in the terms portrayed, just looking at price-elasticity is simplistic and the real world is never, EVER that, when it comes to economics.

Couldn't agree more

But there's one obvious example of tax policy changing behaviour, and that's Labour's 1960's policy of bleeding the rich not just with very high marginal rates of income tax, but with an investment income surcharge (IIS) leading to an effective 98% marginal rate on unearned income. It was supposed to cause the very rich to pay more, but they forgot, or failed to understand, the behaviour-modifying effect.

Or rather, they took their capital and income therefrom offshore where all taxes could be easily evaded and so the law of unintended consequences operated.

Looking at it from today's perspective, or even that of the eighties, it appears accepted as abundantly clear that excessive tax rates do not bring the intended tax takes. That, of course, does not in itself disprove the tenet that tax can be an effective tool in altering financial behaviour, or indeed that progressive tax systems are not socially equitable.

Bringing it back to car tax - I personally never thought that it paid for the roads or anything like that - it was and remains just another form of general taxation that goes into the big pot called the public purse (but not so public that I could ever get much from it!!).

[Saracen]

....

Or rather, they took their capital and income therefrom offshore where all taxes could be easily evaded and so the law of unintended consequences operated.

....

And tgat, if course, is the result of mis-understanding the effects and implications of price-elasticity. They were after revenue-raising effects, and ended up with large-scale behaviour modification.

And yup, going offshore, and indeed simply emigrating, was one behavioural effect effect, and the most dramatic and obvious. But by no means the only one. It comes down to the splits in demographics. For the super rich, where they live and, more importantly, are resident and domiciled, is largely a matter of whim, because they already have property in several places (and countries).

Changing your personal tax status is little more than packing bags (or rather, getting your staff to pack bags), getting on your jet and going to one of your other homes in another country.

But that's a very small, if filthy rich, group. A far bigger effect was on the merely affluent, to 'rich'. A LOT of small businesses require start-up capital, or to go from small to slightly larger, venture capital to take the next step. Now tell either the entrepreneur about to risk his house, of the 'angel' about to risk tens or hundreds of thousands that if the venture fails, they lose 100%, and if it succeeds, the government takes 98% of the returns. Only a complete moron would do that.

The higher the marginal rate of tax, the less incentive there is either for investors or entrepreneurs to take the risk, and it's not just about the super-rich, them being largely the ones than can up sticks and change tax residency at the drop of a hat.

And that, of course, is why the current ideas for skinning the wealthy is based on wealth and/or property taxes, like a mansion tax. If you pitch it right, if you target them in ways that make it very hard to modify behaviour, and if you don't attempt to overmilk the cow, then you can raise revenue without killing the golden goose. Excuse mangled metaphors.

Personally, I have no problem with such a tax provided it's pitched right, with exemptions for the asset rich but cash poor, provided it's targetting the genuinely rich not just those with a long term asset (their home) that happens to have vastly inflated due to a heavily skewed property market.

Oh, and provided we don't see mission-creep' .... which we inevitably will. After all, Income Tax is a "temporary" tax that is only levied on wealthy landowners, right? A purely short-term measure .... to fund the Napoleonic wars. Maybe someone ought to tell the Treasury that that war was over an, erm, .... while ago. And to query how their interpretation of 'wealthy landowner' includes just about everyone in full time employment at anything much over the minimum wage.

That, of course, does not in itself disprove the tenet that tax can be an effective tool in altering financial behaviour, or indeed that progressive tax systems are not socially equitable.

Well, in both cases, the devil is in the detail. Tax can be such an effective tool, at least up to a point, but there's certainly no guarantee it always will be, not least because it largely depends on often irrational human behaviour. I have, for instance, been known to buy something that makes no rational sense, but I bought it because I wanted it. I've also been known to not buy thinfs that, purely in financial terms might be rational, because of non-financial reasons. There are, for instance, companies I refuse to deal with, period. If they are a sole supplier of something I want, I'll go without, and would continue to go without if they offered me a 100% discount. Why? Purchase decisions aren't always, or in my view even often, about price alone. Which makes price elasticity calculations, and hence taxation decisions, decidedly tricky.