HMRC shifting the “tax burden” onto UK consumers
Accounting experts have accused HMRC of shifting the “tax burden” onto UK consumers after finding that 21 per cent of their total income is accounted for by VAT.
HMRC collected £125 billion in VAT in the 2017 to 2018 tax year, 60 per cent more than the £78 billion they collected just 10 years ago in the 2008 to 2009 tax year.
21 per cent of HMRC’s total income is now VAT, which experts have said is disproportionally affecting those with lower incomes. This is compared to 31 per cent in income tax and 22 per cent in national insurance contributions.
HMRC’s total income last year reached £594 billion, the highest it has been in 30 years. The UK now ranks at 20 of a possible 36 OECD countries for tax burdens with 33 per cent gross domestic product (GDP). France leads the table with 46 per cent.
An expert in the industry has stated that VAT is “a crucial component of total tax take and the government will be keen to protect this revenue source.”
Lower income individuals are most likely to be impacted by the increase in VAT as costs rise. Which in turn, could potentially lead to a reduction in VAT as consumers spend less due to higher prices. If this were to come to fruition it would certainly be an issue for the Treasury.
Experts have suggested that “the government could put contingency plans in place to help counter the potential fall in receipts – for example, VAT rates could be reduced in order to encourage consumers spending.”