Many people are struggling to make ends meet at the moment. That's why we built Fairculator. It helps businesses charge a fair price, based on what people can afford to spend.
Fairculator asks you about your disposable income, and then calculates a fair, progressive VAT rate for you. On current VAT rules everyone pays the same rate, putting the greatest burden on the poor. On a progressive VAT, the poor pay less (because they spend less) and the rich more.
As the world approaches economic recession, we also want to use Fairculator to make a bigger point about how to implement a fairer tax system. Repairing the economy will be costly - let's make sure the burden is spread across society in a fair way.
To calculate your progressive VAT rate, we first deduct 8% from your disposable income, which is the average monthly savings rate in the UK. Then, we apply no VAT on annual spend below £15,000, and 45% on anything beyond that.
if your monthly disposable income is £2,000, we assume you will spend £22,080 annually. In this scenario you would pay 0% in VAT on the first £15,000, and 45% on the remaining £7,080, making for an effective VAT of 14%.
By this logic, it works out to about 20% (currently the standard rate) in effective VAT for people around the median disposable income, and less than 5% (currently the reduced rate) for people on the poverty line. People in the top 1% of disposable income pay an effective rate of about 37%, all the way up to the limit of 45%.
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