The current Conservative government and the main opposition Labour party recently ruled out future rises in VAT ahead of June’s election.
Since the 10%+ debit from the financial crisis, the UK has enjoyed a decreasing government deficit, but still faces a challenge to balance the books. Since the 2015 elections pledge from the Conservatives not to raise VAT, employee taxes or income taxes has left the current government restricted in its options to tackle the rump of the deficit. So this commitment on VAT is a surprise.
UK standard VAT rate rise alternatives
- 5% reduced VAT rate increase
- Goods within the 0% rate band removed
- Increase Insurance Premium Tax from the current 12% to equal VAT at 20%
- Eliminate VAT relief to businesses, e.g. the VAT exemption on financial services which would only become possible once the UK leaves the EU VAT system on Brexit
- Introduce more VAT-like taxes, for example, Sugary Drink Tax
- Increase import customs and duties taxes
- Reverse the reduction to Corporation Tax, currently due to drop to 17% next year
- Increase National Insurance Tax paid by employers and employees
- With the most sensible growth-orientated type of tax, the introduction of Land Value Taxes
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