Speculation about a post-election rise in value added tax (VAT) has been fuelled by a new report showing Britain has the fourth-lowest rate in the European Union. The report by KPMG says that there is a global trend towards:
- more countries introducing VAT
- VAT rising
- VAT being applied to more goods.
The average rate of VAT in the EU rose to 20 per cent at the start of the year, which compares with 17.5 per cent in the UK, according to the report by KPMG. This would suggest that whoever triumphs in the upcoming Election could find it difficult to not increase VAT - more in line with the EU. KPMG go on to state that Governments will need to shift away from direct taxation towards more indirect traxes (such as VAT).
Gary Harley, head of indirect tax at KPMG in the UK, said: 'Driven by a sluggish economy on the one hand and falling direct tax rates on the other, all around the world governments are reassessing their long-term tax policies.
'The result is that many governments are tightening their existing indirect tax regimes or preparing to introduce new ones.'
Accountants Grant Thornton recently estimated that a rise in VAT to 20% would bring in an extra £12bn a year.
£200 Pension Cashback Offer
Make a qualifying deposit or transfer a pension to our partner Interactive Investor.
- Deposit or transfer a pension of at least £20k and you could earn £200 cashback
- Terms and Fees apply, Capital at risk
- New & Existing customers opening a SIPP
- Offer ends 31st July 2026
Before starting your transfer, check you won't lose any valuable benefits (such as guaranteed annuity rates or a lower protected pension age) and find out what exit fees you might have to pay
