Pre-Budget Report 2009 - VAT: "further rises cannot be ruled out", says KPMG
"While the return to a VAT rate of 17.5 percent as of 1st Jan 2010 is not unexpected, it will still be a disappointment for many in the retail sector who hoped for an extension.
Wednesday, 9 December 2009
Gary Harley, Head of Indirect Tax at KPMG, commented:
"While the return to a VAT rate of 17.5 percent as of 1st Jan 2010 is not unexpected, it will still be a disappointment for many in the retail sector who hoped for an extension.
"However, regardless of which party wins the upcoming election, a further VAT rise cannot be ruled out as a way of reducing the budget deficit - a rise of 2.5 percent rise in VAT could raise £13.5bn, 7 percent of the budget deficit.
"The average VAT rate across Europe is now just over 20 percent - the UK currently has the fourth lowest VAT rate in Europe. In the past few years Germany and the Netherlands have increased their rate to 19 percent. It wouldn't be surprising if the UK Government decided to bring the UK rate in to line with its European competitors. Spain is already doing this, raising their rate from 16 to 18 percent from the 1st July 2010.”
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About KPMG: KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with 11,500 partners and staff. The UK firm recorded a turnover of €2.2 billion in the year ended September 2008. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 148 countries and have more than 113,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss cooperative. KPMG International provides no client services.