EPTOn February 22 2026 15:20 RvB wrote:
It's correct. If wealth would just compound into infinity we'd see Yoshiaki Tsutsumi topping the lists of richest persons in the world.
It's correct. If wealth would just compound into infinity we'd see Yoshiaki Tsutsumi topping the lists of richest persons in the world.
That report's summary literally starts with "measuring VAT burdens relative to expenditure – thereby removing the influence of savings – is likely to provide a more meaningful picture of the distributional impact of the VAT", in other words, changing the denominator to disregard savings to make it more "meaningful". That is quite the statement. Their justification for doing that is supposedly found in this report: https://taxation-customs.ec.europa.eu/system/files/2016-09/report_evaluation_vat.pdf
I can't find anything remotely like it in the summary, but am not going to read 600+ pages to track down where that might say something vaguely like that. I suspect, though, that this report may very well have argued that their analysis is best performed when ignoring savings, because I did find some tangentially related points about how VAT doesn't change the incentive to save, probably put clearest here:
Note too that, unlike systems which tax labour earnings but simply exempt investment
income (or tax it at a reduced rate), VAT does not provide scope for avoiding tax by
converting labour income into capital income – the source of major practical difficulties
in direct tax systems across Europe and the world. This is because income from
whatever source is taxed equally when it is spent. Thus people who earn exceptional
returns to their savings (whether through luck, skill or devices to convert labour income
into capital income) do pay more tax on those returns. Disincentives to save are instead
avoided by declining to levy tax up-front on earnings that are saved rather than spent,
targeting those whose decision whether to save or spend is marginal (and so whose
incentives matter) rather than those whose prospect of earning exceptional returns
means that they would save in any case.12
income (or tax it at a reduced rate), VAT does not provide scope for avoiding tax by
converting labour income into capital income – the source of major practical difficulties
in direct tax systems across Europe and the world. This is because income from
whatever source is taxed equally when it is spent. Thus people who earn exceptional
returns to their savings (whether through luck, skill or devices to convert labour income
into capital income) do pay more tax on those returns. Disincentives to save are instead
avoided by declining to levy tax up-front on earnings that are saved rather than spent,
targeting those whose decision whether to save or spend is marginal (and so whose
incentives matter) rather than those whose prospect of earning exceptional returns
means that they would save in any case.12
But this has nothing to do with measuring whether a tax is progressive or regressive. They aren't really very interested in that in the first place, as far as I can see.
Anyway, if we ignore savings then VAT might not be regressive. But for someone who lives paycheck to paycheck that ignores 0% of their wealth, and for Musk that ignores 99.9999999% of their wealth (and I'm probably missing a few 9s there). Clearly "disregarding savings" is doing a lot of heavy lifting in that report.
