Current issues in VAT

The increase in the standard rate of VAT from 17.5% to 20% with effect from 4 January 2011 is central to the Coalition government’s deficit reduction strategy. On the other hand the Labour Party says this is the wrong tax at the wrong time.

VAT – like other taxes – is reflected in the value of goods and services delivered to consumers. If Business A organises its tax affairs more efficiently than Business B Business A will deliver better value and gain customers and investors. Business B will deliver poorer value and lose customers and investors. These are the iron laws of capitalism. The notion that a company’s tax bill stands in a direct relationship to the public good is as superficial as it is irrational. Tax fairness – like peace – is a complex not a simple topic.
HMRC have pursued four policies in 2010:

• resisting...