Poorest spending higher proportion on VAT than richest

The poorest households are spending more on goods carrying VAT than they did 25 years ago.Poorest spending higher proportion on VAT than richestThe poorest 20% of UK households spend a higher proportion of their disposable income on VAT than the richest 20% according to the Office for National Statistics said.

Its research covered the year 2009/10, which was before the increase in VAT from 17.5% to 20% in January 2011.

When Chancellor George Osborne announced the increase in his 2010 Emergency Budget, the government said that VAT was a progressive tax.

But the ONS research suggested that is not the case.

It said that the poorest fifth spent 9.8% of their disposable income on goods attracting VAT in 2009/10, while the richest fifth spent 5.3%.

That figure for the poorest fifth showed a considerable fall from the figure of 10.7% in 2008/9 and 12.1% in 2007/8.

It is sometimes argued that the poorest households are not hit as hard by rises in VAT, because the tax is not charged on essential items such as food and non-alcoholic drinks.

The ONS research also found that the poorest households spent 58% of their expenditure on goods on which VAT was charged in 2009/10, much higher than the 45% they had allocated to VAT-charged items in 1986.

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November 2, 2011 · Home Based Jobs · 5 Comments
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