- The UK must reform its VAT system due to its complexity, exemptions, and lack of digitalization
- VAT has been crucial for funding public services in the UK for the past 50 years but is now considered outdated
- The current VAT system taxes only about half of all consumption, which is low compared to international standards
- The system’s narrow base and varying rates add unnecessary complexity and reduce efficiency
- The UK is behind other countries in VAT digitalization, increasing compliance costs and reducing tax collection efficiency
- Brexit offers a unique opportunity to overhaul the VAT system without EU harmonization constraints
- Reforming VAT is challenging due to political resistance, as seen in the pasty tax incident of 2012
- An evolutionary approach to reform, focusing on specific areas like exemptions and registration thresholds, could be more feasible
- ICAEW advocates for immediate VAT reform leveraging post-Brexit freedoms and new technologies
- Examples from other countries like Brazil show that significant tax reforms are achievable
Source: icaew.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
