Latest VAT developments

VAT RISE PREDICTION

According to a survey of influential economists,
VAT is set to rise under the new coalition government.

The BBC reports that a broad spectrum of independent economists currently used by the government to assist its forecasting said they expected the rate to rise in the coming parliament.

The majority predicted that a rise in the standard rate from the current 17.5% would be announced in the emergency budget which is expected 50 days after the new government takes over power and that it would take effect before the end of 2010. Analysts say a 20% rate would raise an estimated £11.5bn a year.

An increase in VAT is generally seen as the most attractive way of boosting the government's tax revenue, with cutting the country's budget deficit a priority for the new Conservative-Liberal Democrat coalition.

The coalition government says it is aiming for a significantly accelerated reduction in the country's borrowing, with £6bn of public spending cuts planned in the first year. However, £6bn in cuts will be merely a drop in the ocean compared to what is required to tackle the current £166bn deficit.