| Obviously, in reducing the VAT rate from 17.5% to | | | | However, they are now claiming that this was only |
| 15% for a year will create a shortfall in the | | | | one option that had been discussed, that has since |
| government’s finances for the year. There are a | | | | been rejected. It is estimated that this 1% VAT |
| variety of predictions on exactly how much this will | | | | increase could net the Government around £5 billion. |
| be, however, most agree that it will be somewhere | | | | The current plan is to increase the rate of income |
| in the region of £12.5 billion. The government will | | | | tax on high earners to 45%. Unlike the estimated |
| have to make this up in some way or another: | | | | £5 billion above, this is expected to recover just |
| One option the Treasury has considered, but is now | | | | £1.5 billion - plus it is likely that many high earners will |
| denying is to INCREASE the tax rate as the | | | | find ways to avoid paying the extra tax. |
| economy recovers. The plans seen on an Revenue | | | | The other, as of yet less mentioned part of the plan |
| and Customs website suggested that | | | | is the increase in Petrol, Tobacco and Alcohol duty of |
| “The proposed changes will reduce this [the VAT | | | | 2.5%, so these products will continue to cost the |
| rate] to 15% from December 1 2008 until the end of | | | | same. However, this duty hike will remain in place |
| 2009. The standard rate will then return to 17.5% | | | | even after the VAT rate returns to 17.5% at the |
| from January 1 2010, and subsequently increase to | | | | end of next year, meaning Petrol, Tobacco and |
| 18.5% in 2011-12.” | | | | Alcohol will actually be more expensive in the long run. |