March 29th, 2012
06:17 PM GMT
London (CNN) – I have a confession to make. I don’t like pasties - the rather dry, pastry-heavy snack causing tax troubles for the British government.
Finance minister George Osborne, in a clamp down on VAT avoidance, has decided the tax should now be charged on hot takeaway food. It was obvious from the moment the proposal was announced there would be problems. Buy a pasty, pie or cake and have it served hot - you pay VAT. Take it cold and you don’t.
While the bakers and pie eaters of Britain may be up in arms, anyone who has studied tax knows that these tricky intricacies are inevitable. They happen all the time, especially since snack taxes have been introduced in the U.S. to help prevent obesity. There are even learned journals and articles on the subject.
One example where the tax failed spectacularly was when California introduced a “snack tax” in the early 1990s to bridge the budget deficit. Within hours, the nonsense of defining what was a snack and what was not became obvious. Popped popcorn was. Unpopped popcorn wasn’t. The Harvard article describes the tax as a “disastrous effort.”
In every country that has tried this, the law descends into farce, throwing up inconsistencies, around the idea of: “What is a snack?” “What is a donut?” “What is bread?” "When is a cake taxable and when is it not?”
In the UK, McVitie’s sued to get their Jaffa Cakes designated as cakes (which would not attract VAT). In the end they won. But not before the tribunal had to consider whether the hard, stale Jaffa Cakes meant it was a cake!
I sympathised with the politician's dilemma. Do nothing and you don’t close your budget deficit. Try to raise more money and you end up looking ridiculous. Voters loathe the apparent lack of common sense. After all, we all know a snack or a cake when we see it, don’t we?
So worry not Mr. Osborne. Your hot food tax will no doubt eventually be abandoned - at some point - when the idiocy of trying to make these distinctions becomes overwhelming. And in the meantime – I for one won’t be paying for those dreadful pasties. Instead I shall have to decide whether I can afford to have that slice of cheese pie hot or cold.
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