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Breaking VAT: Is Gove Cooking Up a Replacement?

Author

Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

Breaking VAT: Is Gove cooking up a replacement?

Over the weekend we have seen Michael Gove’s leadership go to ‘pot’* over his admission that he’s snorted a few lines of Colombian marching powder as an impressionable young journalist.

Perhaps something which has gained much less coverage is his proposal to scrap #VAT after #Brexit if he is made premier following the UK leaving the UK.

So, what will he replace it with?

Well the first question is how much VAT comes in to the Treasury coffers each year. In essence, what would the cost be of scrapping VAT?

According to HMRC’s annual report for 2017-18, VAT constituted £128.6bn. This is a steadily growing amount and represents 21% of total revenue.

Only income tax and National Insurance Contributions (“NICs”) eclipse these figures.

As such, one would think that Mr Gove had clear ideas of a replacement.

Thus, all we have heard from Gove HQ is that the replacement will be “lower, simpler”. Clearly, this alternative is going to have to bring in a substantial amount of revenue despite being ‘lower and simpler.’

Perhaps, based on his recent admissions, Mr Gove might be looking at legalising recreational use of drugs?

This, of course, would result in a new source of taxable income.

Canada legalised the use of marijuana last year and has predicted $400m of additional tax revenues.

Of course, this would go nowhere near making up the shortfall on the scapping of VAT.

Perhaps, as we speak, a study is being done on the #tax revenues that could be raised from legalising the drug of choice of the snorting classes?

 

*Thanks to the Sunday Mirror for the borrowing of this pun

 

If you have any queries about this article or tax matters in general then please do get in touch.

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