Unintended consequences of tax incentives
Kelly Sizer’s article on the changes to the VAT rules on vehicles adapted for use by disabled people is a salutary lesson in how well-intentioned tax incentives have to be reined in because of the way they are exploited. Until I did some background reading prompted by the article I was unaware how widespread the problem was. One case was reported where four people had purchased 100 high-end cars removed the adaptations and sold them at a huge profit. The rules had to be tightened but inevitably as a result some people who deserve the relief will no longer receive it. There have been other cases of similar reliefs going wrong such as the incentives paid from 2004-05 to encourage companies to use PAYE online. Those had to be changed when it became clear that people were creating companies with no real substance simply to...
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