Sunak could slash VAT in a bid to rescue the economy
Rishi Sunak is reportedly considering slashing the value-added tax (VAT) in a bid to mitigate the economic fallout from the coronavirus crisis.
According to The Sunday Times, Rishi Sunak has ordered Treasury and HMRC officials to prepare options for reducing the sales tax, which has stood at 20 per cent since January 2011.
The options include a cut in the headline rate and zero rating more products for a fixed period. Currently, a temporary zero rate applies to personal protective equipment (PPE) until 31 July.
The chancellor could announce lowering the VAT and business rates in a speech in early July, officials told the newspaper,
Mr Sunak earlier suggested he was open to the idea but would first need to see how quickly consumers resumed spending.
It would not be the first time VAT was cut in response to a crisis. After the 2008 financial crash, thenchancellor Alistair Darling reduced the sales tax from 17.5 per cent to 15 per cent for 13 months.
Questioned on the potential VAT cut, Mr Sunak did not rule the option out as a potential option to rescue the ailing economy as the government prepares to lift further lockdown restrictions in England.
He told Sky’s Sophy Ridge yesterday: “Well that is absolutely a matter for a budget and you would not expect me to comment either way on any speculation on what’s in a budget. It’s very much a matter for the chancellor.”
It also comes as former chancellor Sajid Javid used a separate interview with the newspaper to call for Mr Sunak to cut VAT from 20 per cent to 17 per cent for a year, as well as cuts to employers’ national insurance to increase demand and hiring.
Mr Javid said the VAT plan would cost £21bn but argues that it would result in “turbocharging growth”.
In a report written with the Centre for Policy Studies, a centre-right think tank, he also suggested there should be no increases on tax for anyone, and is backing extensive government borrowing to pay for infrastructure spending in poorer regions in the country.
The Independent has approached the Treasury for comment.