Will the new government raise VAT on food?
There is much panic amongst consumers and food job workers at present over predictions that the government will raise the UK's value added tax (VAT) rates on consumer items from 17.5 per cent to 20 per cent. It is true that the new coalition government is aiming to take drastic action to cut the UK's massive budget deficit, but raising the VAT on food items could be disastrous.
Although the UK as a whole seems to be bracing itself for an inevitable raise in taxes on everyday products, a higher rate on essential, non-discretionary items such as food could be extremely damaging to consumer finances. This would make life particularly difficult for low-income families, not to mention seriously knocking newly-rebuilt consumer confidence.
That the government will impose a VAT increase on food is far from certain, but people are worried because of a recent report from the International Monetary Fund (IMF) suggesting that such a measure would be good for the UK economy. IMF claims that removing exemptions (i.e. food) from VAT could raise around £50 billion in extra cash for the government (if the number of VAT exemptions was halved).
Justin King, CEO of Sainsburys, completely disagrees, saying:
Consumers and the food industry will have to wait for the government to announce new tax measures in their emergency budget - due anytime in the next 50 days.
Although the UK as a whole seems to be bracing itself for an inevitable raise in taxes on everyday products, a higher rate on essential, non-discretionary items such as food could be extremely damaging to consumer finances. This would make life particularly difficult for low-income families, not to mention seriously knocking newly-rebuilt consumer confidence.
That the government will impose a VAT increase on food is far from certain, but people are worried because of a recent report from the International Monetary Fund (IMF) suggesting that such a measure would be good for the UK economy. IMF claims that removing exemptions (i.e. food) from VAT could raise around £50 billion in extra cash for the government (if the number of VAT exemptions was halved).
Justin King, CEO of Sainsburys, completely disagrees, saying:
"The coalition have announced they will raise the tax band for lowest earners but if they put VAT on food they take all that benefit back. It is the poorest in our society that spend the most of their weekly money on food so that would be counter-intuitive,"
Consumers and the food industry will have to wait for the government to announce new tax measures in their emergency budget - due anytime in the next 50 days.
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