Budgets are a perennial disappointment, I find, but this year Chancellor Sunak did supply the germ of a good idea. Pigouvian tax is a tax on any market activity that generates negative externalities.
Taxing alcoholic drinks according to strength is an excellent idea, and doing away with banding altogether would have been even better. A simple uniform tax rate of 'x' pence per gram of alcohol would have covered everything from alcopops to the strongest spirits and it would be effortless to impose at the factory gate. As a further simplification of the tax regime, it would make sense to make all alcoholic drinks zero rated for VAT and raise the new uniform alcohol tax to compensate - which would also magnify the top to bottom difference in cost and do away with such complications as minimum unit price.
Exactly the same process could be applied to sugar and salt - 'x' pence per gram as the material enters the national food chain as a raw material.
In the present COP26 era it is also worth considering taxing all forms of energy in a uniform manner too. Instead of taxing fuels per kilogram or litre or cubic metre or kilo watt hour we should tax according to total energy content - pence per megajoule. This would go a long way to promoting energy efficiency. Those with private renewable energy sources would be operating tax free!
I am sure that others will be able to furnish further examples.
Rapid Response:
The germ of a good idea.
Dear Editor
Budgets are a perennial disappointment, I find, but this year Chancellor Sunak did supply the germ of a good idea. Pigouvian tax is a tax on any market activity that generates negative externalities.
Taxing alcoholic drinks according to strength is an excellent idea, and doing away with banding altogether would have been even better. A simple uniform tax rate of 'x' pence per gram of alcohol would have covered everything from alcopops to the strongest spirits and it would be effortless to impose at the factory gate. As a further simplification of the tax regime, it would make sense to make all alcoholic drinks zero rated for VAT and raise the new uniform alcohol tax to compensate - which would also magnify the top to bottom difference in cost and do away with such complications as minimum unit price.
Exactly the same process could be applied to sugar and salt - 'x' pence per gram as the material enters the national food chain as a raw material.
In the present COP26 era it is also worth considering taxing all forms of energy in a uniform manner too. Instead of taxing fuels per kilogram or litre or cubic metre or kilo watt hour we should tax according to total energy content - pence per megajoule. This would go a long way to promoting energy efficiency. Those with private renewable energy sources would be operating tax free!
I am sure that others will be able to furnish further examples.
Yours sincerely
Steve Ford
Competing interests: No competing interests