VAT slip?
- 25 Nov 08, 08:24 PM
A Treasury document signed by a government minister states that VAT will rise to 18.5% in 2011-12 - which would represent an unannounced 1% rise in the level of VAT now.
The Tories are claiming that it's evidence of "Labour's secret tax bombshell" and claim that it explains "why there is a black hole in the pre-Budget report because at the last minute Gordon Brown clearly decided to keep secret his plan to hit everyone with an extra tax rise to pay for his borrowing binge."
Not surprisingly the Treasury has a rather more innocent explanation. They insist that it's a document that reflected an option that had been considered by ministers but then rejected before yesterday's statement by the chancellor. This fits in with what both I and the BBC's Business Editor, Robert Peston were told in the few days before the PBR.
The Treasury insists that the government has no plans to raise VAT. That, of course, does not rule out them forming those plans in future. Of course, governments of all colours never rule out anything if they can avoid it.
The document is an explanatory memorandum to the statutory instrument (legal document) that enacts the temporary cut in VAT. It's been widely issued and can still be found on a government website. It states that:
"VAT is a tax on the final consumption of goods and services, production and distribution. It is charged on the majority of standard rate of 17.5%. The proposed changes will reduce 2008 until the end of 2009. The standard rate will then return 2010, and subsequently increase to 18.5% in 2011-12."
