Reducing VAT: How Likely is It to Happen?

6 March 2015, 16:59

A lot of people might see VAT as unfair in some situations. Certainly, the news has been full of stories of late that relate to requests to reduce or get rid of VAT on certain items. The tourist industry has been lobbying for a reduction in VAT for a long time now, in the hope it would boost tourism to the UK. Another report stated that MPs were asking VAT to be stopped for sixth-form colleges. Still more news reports focused on the perceived unfairness of women having to pay VAT on the sanitary items they have to buy each month. It certainly seems as though there are wide-ranging calls for VAT to be reduced or scrapped in lots of different areas.

But how likely is it this could happen? After all the UK government receives a lot of VAT receipts from businesses up and down the country. That money helps to reduce the national debt and also to pay for vital services many of us use on a regular basis. Yes, we’d all like to pay less in tax than we do at the moment. However it might be prudent for us to consider where that tax money goes.

Of course there are two sides to this story. As individuals we have to consider how much we pay in VAT. We cannot change the amount we pay. The only way this would be possible would be if we had our own business and we dodged the tax through evasion – something that regularly results in prison sentences. Rightly so, too. However while we might enjoy getting rid of VAT altogether, we would probably find other taxes would rise to account for the loss of income the government would have as a result.

No one is suggesting VAT should disappear altogether, and let’s face it, this is very unlikely to happen. However there are situations where a reduction in VAT could potentially have a good effect. The most notable one would be reducing it to 5% for the tourism industry. Many believe this would draw in more visitors as a result of lower prices and more affordable holidays. When you add in the potential for more day trips to be made as well, you can see how the figures might eventually balance out.

It doesn’t look as though the tourism industry will have the reduction they want anytime soon. However we are almost certain to have more calls for reduced VAT on particular sectors or services as time goes on. The main problem in answering these calls is that VAT – indeed tax as a whole – is incredibly complex. No question is that easy to answer. So we must simply keep asking them to let the government know we are here with legitimate questions in the forefront of our minds.

 

Comments

  1. Hospitality sector should have VAT reduction to 10% in line with other EU countries. This would have an overall benefit to the economy because of the increase in turnover and occupancy rates for hotels, pubs and restaurants. Employment would also rise in direct relation to these increases. A win, win situation.

    — Steve Burkmar · Apr 24, 11:23 AM · #