Expect VAT 20% from 1 July
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I share the expectation
Back in Feb I explained my thinking on this subject on the TaxBuzz blog in a piece titled: The VAT rate will increase within months. The only question is 'by how much?'
It's all a question of timing and how almost no other tax changes have a fast enough impact on the Exchequer's cashflow.
Mark
Mystic Meg
Are these the same comentators that predicted a huge rise in CGT and withdrawal of entrepreneurs relief? I'm just not sure that this scaremongering helps. If the politicians don't know what they are doing how do the comentators know what the politicians are going to do?
Increase in the rate of VAT.
Those with long memories will remember that one of the first thing the Thatcher government did when it gained power in 1979 was to virtually double the rate of VAT to 15%. That bankrupted many businesses and led to a record increase in the rate of unemployment. The VAT increase also cut the income of those on fixed-incomes such as pensioners, the sick and the unemployed. Is this why the Conservatives are finding it so difficult to win the electoral support that they need and should be getting? Saying that, the election result can be predicted with total accuracity. The winning party, as always, will be the Capitalist Party to which the three main political parties belong albeit as slightly different strands of that Party. One advantage of living in a one-party state like the UK (I would say a one-party democracy but one house of parliament is not elected and neither is the head of state) is that whichever party wins, the financial markets are going to be happy knowing that the UK will follow a decisively right-wing, Capitalist economic policy - and everybody including bean-counters are going to be happy with that - correct?
No chance!
All the major parties have ruled out an immediate increase in VAT, so wouldn't there be a potentially fatal loss of credibility if VAT rose immediately? Secondly, everyone agrees that taking £12.5 billion out of the economy should nto be done in 2010, due to the weakness of the recovery. Thirdly, it would be administratibvely impossible to increase benefits/credits sufficiently quickly to make sure that the poorest were protected from a VAT rise.
RPI problem
The real problem is RPI. We have the increase on 1 January in the annualised figures at the moment - April's annualised rate is 4.4%, and the price of fuel and the weak £ aren't helping. Also gas went down in early 2009 so this negative effect reduces the RPI artificially as the base figure. I wonder whether a canny chancellor might wait until 1 January 2011?
VAT increase? Most probable
The deafening silence on the near £1 Trillion debt, larger than even after WW2!, and an ever increasing amount as nobody in any party is talking cutting the deficit.
la, la land growth from the Treasury and the Chancellor is not going to happen so the deficit will stay near or over £100 Billion p.a. so after 5 years the debt will be £1.5 Trillion!!! Hey I can do arithmetic. I must be an accountant.
The incoming Government, even the idiot Gordon who still talks spend, spend, will have to cut drastically and raise taxes. VAT is an easy target and efficient. Me I like it because other than essentials its me decides whether to spend, not some idiot in Government who thinks he has a God given right to take my money to spend it the way he wants to, mainly on his sycophants.
It will knock the economy but hopefully some sense will prevail and it will be a managed exercise.
Bankrupt
Is it not time we admitted the UK is a bankrupt third world economy?
How does a country declare itself insolvent ? interesting times ! has Gordons teeming and lading excercise with the tax system begun to unravel ?
Yet we can still afford identity cards, new average speed cameras and other state surveilance, to what end nobody knows yet !
A vat rise should put paid to the survivers! those that remain will be those that fiddled a bit more.
We need lower taxation and more enforcement to collect the £136 billion missing from tax evasion I recon given the tools I could spot at least £10k per hour.
I know who not to vote for ! but is there anyone to vote for ?
Save, don't spend
If there was a case for a lower VAT rate on energy use, surely there is an equivalent or better case for the same lower rate on energy-saving measures ... for example, building insulation materials ?
I still find it surprising (in the 21st century !) that politicians harp on about the elderly having fuel poverty, without addressing the underlying cause which is poorly insulated housing, which in many cases could be addressed by re-lining the room(s) with either "Kingspan" or foil/polystyrene overlaid with plasterboard or the equivalent.
No recent properties should exist without this level of insulation.
There is, but you have to get a professional to fit it
Mike there is quite a substantial chunk of expenditure which attracts 5% VAT in relation to energy saving technology, right down to thermostatic radiator valves, but it is no god for the DIY'er as it is a reduced rate applying to the supply of installing the technology (by a builder who is VAt registered) who can then supply the related materials at reduced rate too. But always worth prompting your builder if you are having some work done (other than new build which would be zero rated anyway) as he may not be aware of the reduced rate