Is Our VAT Really High?

24 December 2008, 00:50

Well it is certainly lower than it was just a few short weeks ago, when the government decided to temporarily reduce it from 17.5% to 15%. This was done to try and pep up the ailing economy.

But whether it works or not, you might actually be surprised to learn that our rate of VAT is actually a fair bit lower than that in a lot of other countries in the European Union.

It was in the lowest section of European VAT rates even before the 2.5% drop, but the events of the 1st December actually made our VAT rate the lowest in the whole of Europe, sitting with the likes of Cyprus and Luxembourg at the bottom of the table.

Spain isn’t too bad as it charges 16%, but there are plenty more countries that are worse off in terms of what they have to pay to their respective governments. It seems as if we in Britain have actually got a pretty good deal, even when the VAT rate does eventually go back up to 17.5% again, which should be on the 1st January 2010. Happy New Year…

But just in case you were feeling hard done by at how much more expensive it is to buy things once the government has demanded its cut on top of the basic price, spare a thought for some of our fellow Europeans.

The most popular rate for VAT seems to be between 19% and 20%. There are six countries which have got the 19% rate slapped on them – these are the Czech Republic, Germany, Greece, the Netherlands, Romania and Slovakia. Those who have to stump up 20% on relevant products are Austria, Bulgaria, Hungary, Italy, Portugal and Slovenia. And somewhat weirdly, France is sitting sort of in the middle on 19.6%.

This is beginning to sound like an episode of the Eurovision Song Contest, but while Ireland got a name for itself for winning the contest several times over a few years ago, it isn’t top of the leader board when it comes to value added tax. In fact it is lounging in third place here with Belgium, paying just 21%.

Second place for the expensive tax goes to Finland and Poland, who both come in at 22%. But way out in front are Denmark and Sweden, who both manage to make the amount charged by the British government an absolute gift. Both of these countries are hit by a VAT rate of 25%.

There is plenty more information about VAT on the Politics website.

So the next time you think about how expensive that extra tax is, think about the added amount you would pay if we had the same VAT rate as Sweden. If the basic product cost £4, shops here would have to add on 75p with the current 15% rate. But if we were paying 25%, that same product would cost us £1 more, totalling £5 instead of £4.75. Over the course of a week’s shopping that would make a significant difference to your pocket.