So if we can imagine that UK has been divided in to separate entities with only a backbone connecting them for national defence and other basic larger group interests. How does Vat taxation work in this particular situation.
Value added Tax as it presently stands is applied to all goods that we buy in the shops. With some notable exceptions such as baby goods and food. While for most products it is applied at the standard rate of 20 percent. Alcohol and cigarettes are taxed at higher rates and winter fuel is taxed at the lower rate of 5 percent.
In short there would be no change in SCD. Independent governments within the UK would be able to set their own rate of VAT keeping with the idea that small is manageable. Where it becomes interesting is if we have a separate area like Cambridgeshire for example should choose to apply Vat at only 10 percent. How many people would find that attractive and what would be the result? Or alternatively if you live in area of outstanding naturally beauty for example like Devon or the Lake district. they may well choose to apply 22 percent tax and raise more revenue from tourists and such like.
While the above deals with VAT on a personal level. Let us take a look at how that would work with Businesses. Of course Businesses can claim Vat back from the taxman on purchases that they make. So for example a car company in the Wirral needs steel from Yorkshire to make its cars. As this deals with two entirely separate governments under the SCD idea this is a possibility of how it could work. For example lets call one of them Merseyside and the other South Yorkshire. They charge different amounts of Vat. Merseyside charges 15% and Yorkshire charges 20%. In this case our car company would be due 15% back from Yorkshire.
While this would not be done on a personal level but the figures would be collected by the VAT department and then a final amount would be taken off the amount owed in reverse and what is left could be collected. However of course some governments could choose not to be party to such an arrangement and this too would be acceptable. The fundamental guide in SCD is that it can if that is what each group of people want.
However there is a major problem with the above. When it comes to filling in a VAT form you could have 22 different areas to claim Vat against. Instead of as it is now having to specify against just the EU. This may not practical. So we could do away with Value added Tax altogether. However this is problematic as most governments can raise as much as 40 percent of their revenue this way.
If one wants to encourage communities and accountability by just having reclaimable VAT in their local sovereign state. Businesses would at first need to look at their own state to make this purchase as there would be a tax benefit for to them to do so. This in itself would create a more diverse business economy. Instead where we at presently import from larger manufactures there may well be a tax cost savings at source. However companies will always choose the cheaper source using tax in this way would allow people control and less dependence over their economic future. The alternative we have seen the results in the last 20 years where there are less and less smaller manufacturing supplies left and ultimately this means less choice.