Could the UK Ever Get Rid of VAT?

20 April 2017, 16:12

Most people have an opinion on value-added tax (VAT), and whether it is a good or a bad thing. But here’s a question you may never have considered: Could the UK get rid of this tax for good? Is there any way this might happen?

In theory, it could do. The government could choose to get rid of it entirely, especially since we are now leaving the EU and will be completely responsible for our own rules and laws again. But would this be a good move?

According to research, VAT receipts are the third-biggest source of income for the government. More than £111 billion was brought in via VAT payments in 2015-16 alone, so if we got rid of the tax entirely, we’d need to find some other way of bringing in the same amount of money. If we didn’t replace that loss, we’d soon find ourselves deep in debt and unable to fund many of the things we take for granted.

So, it looks very unlikely that we would wave goodbye to VAT at any point soon. With that said, once Brexit has been delivered, and we are our own country again, there is a chance the government may decide to make changes to VAT laws as they currently stand. Perhaps the only thing we can say for certain is that the current laws are complex, and untangling them from the complexity that is the European Union is not going to be a quick thing.

While most of us would agree that getting a 20% discount on most of the things we buy – as the result of ditching VAT – would be a good thing, it would have a knock-on effect. After all, losing some £111 billion a year means the Treasury would need to find that exact same amount – or more – elsewhere. Rising taxation, anyone? At least VAT gives us some freedom of choice. Either we decide to buy something with VAT on the price, or we decide not to. We wouldn’t be able to get out of paying a hike in income tax, or National Insurance, or many other taxes that could be added.

In that sense, while getting rid of VAT might seem to be a good thing, and something most of us would appreciate, we’d soon come to regret it. And the government would too, if it did ever consider doing this (which we doubt). So, as we approach the early negotiations of Brexit, we can perhaps expect very little to change as far as VAT is concerned. Whether that will continue remains to be seen. We will be watching to find out what happens next.

 

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