Wow! The UK Government is intending to increase their VAT standard rate from 17.5% to 20% from 4 January 2011. That’s just a year after the rate rose from 15% back to 17.5%.

This was announced in the UK Government’s Budget yesterday.

http://news.bbc.co.uk/2/hi/politics/10371590.stm

There has also been an increase in the top capital gains tax rate for the UK.

These measures are coupled with significant cuts in Government spending. However alcohol and tobacco taxes have not been increased.

Also, items which are currently zero rated for VAT (i.e. the VAT rate is 0%) such as food, books and children’s clothing, will remain zero rated.

VAT/GST is finding favour with Governments looking to increase tax revenue while encouraging savings and maintaining some level of economic stimulus. The rationale is; the bigger spenders pay more tax.

Drastic measures indeed.

Iain

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