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Raging inflation back

There is a lot of talk about the current inflation, which is being blamed on lack of competition. My suspicion is that that the current inflation is partly due to the amount of money that was pumped into the system during the Covid epidemic and partly the effect of a dozen years of Quantitative Easing, which was intended to cause a certain amount of inflation but failed to do so. It may be that we are seeing the pent up effect as the overhang of money hits the market place.

  1. However, lack of competition is undoubtedly a contributing factor, but the most important causes are almost never talked about.Availability of suitable premises at a rent which makes the enterprise viable. Many of the larger retailers have built up substantial property holdings which exclude the smaller operators.
  2. Tax incidence which has a disproportionate impact on small/start up businesses.
    (a) the difference between real purchasing power of wages (net pay minus sales taxes) and gross labour costs (gross pay plus “employers’ ” NI).
    (b) The incidence of sales taxes primarily VAT as sellers hold down prices to maintain volumes of sales ie the incidences is on the retailers. 
  3. Compliance costs of taxation, which is disproportionate on small enterprises. VAT compliance cost is thought to be about 5% of the yield for smaller businesses.