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The UK Should Increase VAT

Clemens Fuest Professor of Business Taxation and Research Director of the Oxford University Centre for Business Taxation discusses an increase in VAT as a strategy for fiscal consolidation
The UK Government currently faces the challenges of fighting the recession and controlling the country's budget deficit. To some extent these are conflicting objectives because cutting public expenditure or increasing taxes will reduce demand at least in the short term and work against economic recovery. But for several reasons letting the deficit grow is no viable alternative. According to the latest economic forecast of the European Commission the UK budget deficit will equal 13% of GDP in the fiscal year 2009/10. The ratio of government debt to GDP will increase from 43% in 2007/08 to 83% in 2010/11. With the exception of...

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