Any proposed reform of VAT rates should take account of the ‘particularly regressive’ nature of the tax, the CIOT’s Low Incomes Tax Reform Group has warned. Responding to an EC paper on the future of VAT, the group also called for the UK government’s proposal to require all registered businesses to file returns online from April 2012 to be considered at European level.
The EC’s green paper On the future of VAT: Towards a simpler, more robust and efficient VAT system invited comments on the merits of a system with no reduced rates (or a very short list), which ‘might enable Member States to apply a lower standard VAT rate’.
‘It is necessary to remember that VAT is a particularly regressive tax and it therefore impacts most on people with low, fixed incomes such as many pensioners and those living on state benefits,’ LITRG said, calling for a ‘holistic approach’ to reform.
The ICAEW Tax Faculty said that, viewed entirely from the perspective of how the VAT rules can be simplified, the removal of reduced rates would ‘clearly simplify’ the system. But it added that such a move would have ‘considerable practical and political consequences’, and any decisions ‘need to be balanced against wider policy objectives’.
Online filing
The government announced at Budget 2011 that, subject to consultation, it will require businesses that are not already required to file returns online to do so from next year.
LITRG said there would be an exception for those who have religious objections to using computers but no exception for others who find it ‘difficult or even impossible’ to meet the requirement, for example ‘people who have disabilities which prevent their doing so, and those who run businesses from remote areas or at low profit margins meaning that a reliable broadband internet connection is either unavailable or prohibitively expensive’.
The group said it was aware of cases where the requirement has left individuals struggling to comply and ‘having to consider closing down otherwise viable businesses or services essential to rural communities’.
Any proposed reform of VAT rates should take account of the ‘particularly regressive’ nature of the tax, the CIOT’s Low Incomes Tax Reform Group has warned. Responding to an EC paper on the future of VAT, the group also called for the UK government’s proposal to require all registered businesses to file returns online from April 2012 to be considered at European level.
The EC’s green paper On the future of VAT: Towards a simpler, more robust and efficient VAT system invited comments on the merits of a system with no reduced rates (or a very short list), which ‘might enable Member States to apply a lower standard VAT rate’.
‘It is necessary to remember that VAT is a particularly regressive tax and it therefore impacts most on people with low, fixed incomes such as many pensioners and those living on state benefits,’ LITRG said, calling for a ‘holistic approach’ to reform.
The ICAEW Tax Faculty said that, viewed entirely from the perspective of how the VAT rules can be simplified, the removal of reduced rates would ‘clearly simplify’ the system. But it added that such a move would have ‘considerable practical and political consequences’, and any decisions ‘need to be balanced against wider policy objectives’.
Online filing
The government announced at Budget 2011 that, subject to consultation, it will require businesses that are not already required to file returns online to do so from next year.
LITRG said there would be an exception for those who have religious objections to using computers but no exception for others who find it ‘difficult or even impossible’ to meet the requirement, for example ‘people who have disabilities which prevent their doing so, and those who run businesses from remote areas or at low profit margins meaning that a reliable broadband internet connection is either unavailable or prohibitively expensive’.
The group said it was aware of cases where the requirement has left individuals struggling to comply and ‘having to consider closing down otherwise viable businesses or services essential to rural communities’.
