Chancellor missed VAT opportunity

“By not increasing the rate of VAT beyond the anticipated return to the 17.5 per cent rate to 19.5 per cent, the Chancellor has missed his opportunity to raise an additional £10 billion per annum in tax revenues to reduce the budget deficit,” says Marc Welby, VAT partner at BDO.

Such an increase would also have created a significant stimulus for consumers to bring forward expenditure to before the end of 2009 and would have assisted those in receipt of pension annuities etc by lifting RPI out of negative territory in 2010.

Welby added: “The Chancellor’s inaction on VAT has come as something of a surprise – the political and economic climate has perhaps never been better for the bitter pill of a VAT increase to be swallowed. Furthermore, that pill could have been sweetened by a reduction in corporation tax to 25 per cent - this would have helped the UK in its bid to remain tax competitive and still have left the Chancellor with a net £6 billion per annum to help reduce the historic budget deficit.”

-Ends-

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