In late June 2010, the coalition government of Prime Minister David Cameron released its emergency Budget
. One item that caught my eye in this time of HST implementation was the change to the UK’s Value Added Tax (VAT). On January 4th, 2011, the tax will increase from its current level of 17.5% to 20%. What was particularly interesting was that this increase is expected to raise approximately £111 billion
in a full year by 2015 – 2016, according to the Office of Budget Responsibility, compared to £80.7 in 2010 – 2011. As well the United Kingdom VAT rate still falls well short of the maximum of 25% allowed under European Union law and was amongst the lowest in the western EU save Spain prior to the proposed increase. A few items that are considered necessities still remain tax free including food, children’s clothing and books while domestic fuel is only taxed at 5 percent. Total tax receipts from all sources are expected to rise from £514.6 billion to £737 billion in the same time period.
The United Kingdom has reached the point of budgetary desperation. As it stands now, the United Kingdom is considered by many economists to be the most indebted nation in the world. Their national debt stands at nearly £924 billion. Their public sector net debt (as shown in the chart below) is projected to reach 70.3% of GDP by 2013 – 2014.