T is for Tax

No political party likes talking about tax rises, especially so near a general election. Rarely do voters go into a polling booth and think- I’m going to vote for a party that is going to take more of my hard earned cash. However, in our credit crunched, debt busting age, there is a feeling amongst many votes that the new Government needs a credible plan to get us out of this hole.


Today it was reported that both the Tories and Labour are planning a V AT rise of 2.5% to 20% should they win the next election. Doesn’t give you much of an option when you go to cast your vote if you don’t think VAT should rise.

So why have they picked VAT? Well, the average VAT rate in Europe is also 20% so there is a feeling that we could afford to pay a little more. And to be honest, it is probably the tax rise least likely to cause offence. National Insurance Contributions is already rising by 1% in 2011 and a new higher rate income tax level of 50% will squeeze high earners (who also tend to complaint the loudest). An increase in direct business taxes would send a bad message to the private sector- the Government is relying on entrepreneurs innovating and creating jobs.

Then there are the indirect taxes- smokers and drinkers are normally picked on for tax increases but these small amounts won’t fill the sort of hole that the Treasury currently has. Fuel Duty is another popular one, but motorists in the UK already pay more tax on fuel than most other countries.

So VAT does seem like a bit of a no-brainer, making all our goods and services more expensive- but risking reducing consumer demand in our still weak economy.

I know they say that ‘what comes up must come down’, but that doesn’t look likely to happen to our tax levels in the near future.

Poli-Chick xx