- The UK Treasury is considering raising the VAT registration threshold from £90,000, but this would exacerbate existing issues, as the UK already has one of the highest thresholds in the OECD, hindering small business growth and leading to revenue shortfalls.
- A high VAT registration threshold creates market distortions by favoring smaller businesses, preventing productivity gains, and causing businesses to limit their growth to avoid crossing the threshold, which can result in significant lost turnover.
- Instead of raising the threshold, it is recommended that the UK lower or abolish it, simplifying the VAT system and broadening the tax base, which could ultimately increase revenue and reduce reliance on more distortive taxes.
Source Tax Foundation
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