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BIG VAT increase coming in UK -

  • 13-05-2010 8:19am
    #1
    Tora Bora
    Closed Accounts Posts: 1,258 ✭✭✭


    According to this on BBC this morning, most economists expect a large hike in UK VAT, to 20% or thereabouts. Cross border shopping will definitely be a thing of the past. My own guess, is that there will be a possible bigger increase in excise duty on alcohol:) An even bigger reason for the beards to stop cross border shopping. All in all, good news for our government's coffers.

    VAT is set to rise under the new coalition government, according to a BBC survey of influential economists.
    Of 28 independent economists currently used by the Treasury to assist its forecasts, 24 said they expected the rate to rise in the coming parliament.
    The majority predicted a rise from the current 17.5% to 20% before the end of 2011. Analysts say a 20% rate would raise an estimated £11.5bn a year.
    VAT was temporarily cut last year to 15% to aid the economic recovery.
    But the tax on consumer goods is seen as an attractive way to boost the government's tax income, with cutting the country's budget deficit a priority for the new Conservative-Liberal Democrat coalition.
    There are 35 economists listed as independent consultants for the Treasury's UK economic forecasts. Six declined to take part in the BBC's survey.
    'Drop in the ocean'
    On Wednesday the coalition said it wanted to see "a significantly accelerated reduction" in the country's borrowing, with £6bn of cuts planned in the first year.
    Any changes to VAT and other taxes are likely to be unveiled in an emergency Budget to be announced within 50 days.
    Economist Azad Zangana, from Schroders, who is predicting a rise in VAT to 19%, said that the UK economy is probably strong enough to withstand the expected cuts and tax rises.
    "While earlier cuts in public spending are inevitably going to dampen economic growth, the UK recovery appears to be gathering pace," he said.
    He added, however, that £6bn in public spending cuts were only "a drop in the ocean" compared to what would be required to tackle the current £166bn deficit.


Comments

  • #2
    slimjimmc
    Registered Users, Registered Users 2 Posts: 7,786 ✭✭✭slimjimmc


    An extra £2.50 or €2.90ish per £100 spent is hardly going to deter cross-border shopping, especially when the pre-VAT price is so much lower in the first place.


  • #3
    OMD
    Registered Users, Registered Users 2 Posts: 2,458 ✭✭✭OMD


    slimjimmc wrote: »
    An extra £2.50 or €2.90ish per £100 spent is hardly going to deter cross-border shopping, especially when the pre-VAT price is so much lower in the first place.


    But add that to a weakening EURO and it makes a big difference. Also deflation in Ireland and inflation in UK


  • #4
    bijapos
    Registered Users, Registered Users 2 Posts: 3,003 ✭✭✭bijapos


    OMD wrote: »
    But add that to a weakening EURO and it makes a big difference. Also deflation in Ireland and inflation in UK

    It depends if the VAT/Sterling increase is passed on or not. Huge shops like Tesco in Newry will easily stomach the VAT increase or Sterling fluctuation on certain products to get punters up the M1 in the first place. They will simply take less profit on product A and B to ensure southerners buy products C,D,E.....to Z.

    On top of this you have to get it out of Southerners heads that there are no potential savings to be made up there, this might take longer.

    If the rush does die off expect to see plenty of "special offers" available in Newry and so on. First rule of any business is get people in the door.


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