|
The recommendation came amid suspicion that the
Government would also have to raise the level of the
sales tax from 17.5 per cent to 20 per cent if it was to
afford the tax pledges it made in its agreement earlier
this week.
Although the IMF's suggestion, published in a
comprehensive survey of public finances around the
world, was less eye-catching than raising the headline
rate, it would potentially have a greater impact on the
price of goods, and on families' living standards.
The document, signed by Dominique Strauss-Kahn, the
IMF's managing director, said: "There is substantial
scope for improving the revenue performance of the VAT
in almost all countries, including by eliminating
exemptions and reduced rates."
VAT is not charged by HM Revenue and Customs on certain
items, including food, children's clothes, domestic
passenger transport, books and prescription drugs.
The IMF said Britain could raise 3.3 per cent of its
economic output – about £50 billion a year – merely by
halving the number of exemptions.
It added that despite having among the highest levels of
petrol duty in the Western world, Britain could afford
to increase fuel taxes slightly more, raising a further
£3 billion.
The suggestions were likely to fuel suspicion that
George Osborne, the Chancellor, would raise a series of
taxes, including VAT, at the emergency Budget, which is
due to take place within 50 days.
City commentators, including Robert Chote, the head of
the Institute for Fiscal Studies, and 24 of the 28
economists regularly surveyed by the Treasury,
pinpointed the sales tax as the most likely candidate to
rise in the Budget.
However, few suggested that the Treasury should lift the
exemptions, which also included financial services fees.
Some warned that increasing VAT on zero-rated items
would affect the finances of lower income families in
particular.
The IFS calculated in its Green Budget earlier this year
that such a move – even at a more limited level, raising
only £24 billion – would account for about 7 per cent of
the income among low-paid workers.
The increases may be necessary if Britain was to start
reducing its deficit, the IMF said.
It pointed out that, over the next few years, Britain
would need to reduce its deficit by 9 per cent of gross
domestic product – equivalent to £130 billion.
The Government has yet to specify how fast it intended
to cut the deficit, although it pledged to cut spending
by more than it raised taxes.
Source:
Telegraph.co.uk, United Kingdom, dated 15/05/2010
|
