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Thinktank recommends elimination of VAT exemptions
A research and policy institute has advised the Government to tackle the crisis in public finances by removing exemptions on VAT.
Reform said that the move would result in the tax becoming less complex and bring its application in the UK in line with the rest of Europe.
The thinktank added in its 'Fixing the UK's tax system' report that eliminating VAT exemptions, which is an indirect tax on consumption, is preferable to increasing income tax or NI contributions.
"[Britain] is one of only four EU countries to apply a zero rate to food and one of only three to apply a zero or reduced rate to children's clothes," the study said.
"Replacing personal allowances with a zero rate threshold of an equivalent amount (£6,475) would also raise extra revenue, while making the income tax system simpler and fairer by capping the benefit at the basic rate."
According to Reform, these measures taken together would result in a revenue increase of more than £8bn.
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