Kabir's Econ Blog

October 3, 2009

Trade

Filed under: Uncategorized — kabir1892 @ 9:00 am

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The number of vehicles that are being made in the UK dropped by 31.5% compared to last year. Even though this is true, industries have noticed positivity with sales. This is because car owners can get a 2000 pound subsidy if they trade a car in that is 10 years old. They receive the payment from taxpayers and the industry. This scheme however, is done by February.

The scheme might be extended though by the industry. But this can only happen if others agree. Others believe that the cost to the taxpayer is too high and that the industry have to return to independence someday. However, there is still a chance of extension because it benefits the industry since employments would increase and the number of people producing will rise through the supply chain. 

Another reason is because sales of the vehicles brings value added tax. For example, an average price that they sell the car at is 9000 pounds. The government will then receive 1350 pounds. They say that around 300,000 cars have been sold with this scheme. And with the average price of 9000 pounds, the government makes 405 million pounds in value added tax. It is expected that 17.5% would be returned in value added tax by the end of the year.

Economists however, need to think this over since people might take advantage of the scheme by buying a new car at an event which is a huge purchasing decision. People could spend from other products and services to buy a car and will therefore mean that governments will not receive value added tax. So governments have to be careful with these costs and benefits before they decide to extend the scheme.

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1 Comment »

  1. Well done Kabir, great to see you following the news. What diagram could you use to illustrate your post?

    Comment by Dr Anthony — October 13, 2009 @ 8:46 pm | Reply


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