Leading economists caution that an increase in the Value Added Tax (VAT) poses the most significant threat to the UK economy among the major tax options currently being considered for next month’s Budget. Analysis from the National Institute of Economic and Social Research (NIESR) suggests a VAT hike would result in a 0.9% drop in GDP in the first year, alongside increases in inflation, interest rates, and unemployment. Raising Corporation Tax is considered the second-worst option, with a 0.2% GDP impact, causing a smaller but more persistent long-term economic drag compared to the immediate damage of a VAT increase. The least economically damaging route, according to researchers, would be increasing Income Tax, even though this contradicts Labour’s pre-election commitment not to raise taxes on working people. Ultimately, the Chancellor is under intense pressure to bridge a $30 billion budget shortfall while selecting tax measures that inflict the minimal possible economic harm.
Source: cityam.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.
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