Schroders economist warns of VAT rise after election

| April 27, 2010 | 0 Comments
”Schroders

According to Schroders European economist, Azad Zangana, we can expect to see a rise in VAT after the general election.

In their election manifestos, the Labour Government and the Conservative party have not ruled out an increase from the current rate of 17.5%.

Last month, Gordon Brown said he was leaving open the possibility of VAT reaching 20% but items such as children’s clothing and newspapers are set to remain zero rated.

At the end of 2008, the Labour Government slashed VAT from 17.5% to 15%, in attempt to revive the High Street, which was flagging at the time as the UK was in recession.

It then reverted back to the 17.5% rate on 1 January 2010 but speculation has been mounting that the sales tax could increase, no matter which party wins the election.

Mr Zangana comments: “We believe that raising VAT from its current rate of 17.5% to 19% would make not only make a significant contribution to the black-hole in the government’s budget forecast, but it would also be the most efficient way of collecting revenues quickly - as a result, we expect VAT to be raised to 19% after the general election.”

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