Business tax and VAT to increase

Published:  21 October, 2009

LONDON: Tax policy will change as government struggles to plug holes in public budgets said KPMG.

VAT is likely to be a strong contender for tax rises, whichever party wins the election.

Sue Bonney, head of European tax, said VAT had proved a relatively resilient source of revenues in the downturn. If the rate had not been reduced, she estimated that UK VAT receipts would have fallen only about 10 per cent this tax year. By contrast, corporate tax receipts are expected to decline about 21 per cent, according to figures from Revenue & Customs based on Budget estimates.

Official documents revealed in November that the Treasury had considered announcing a VAT increase to 18.5 per cent in 2011-12 in the 2008 pre-Budget report.

KPMG also expects tightening of business tax regulation to increase revenues while keeping overall corporation tax rates steady.

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