Revamping UK VAT: Embracing Digitalization and Expanding the Tax Base

• Rita de la Feria, Chair in Tax Law at the University of Leeds, discusses the need for significant changes in the UK VAT system
• VAT has been crucial for funding public services in the UK but the system is outdated and needs reform
• Key issues include lack of digitalization and a narrow VAT base
• Advances in technology have greatly improved tax compliance and administration globally
• The UK lags behind in digital transformation of its tax system
• Currently, only about half of UK consumption is taxed, which is low compared to international standards
• A narrow VAT base leads to dubious benefits and high costs, often benefiting wealthier households disproportionately
• Small changes to the VAT base face strong opposition, highlighting the need for public education on VAT reform
• Previous tax reforms like the abolition of the tampon tax did not meet expectations, underscoring the complexity of tax policy impacts

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.

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