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The past and future of VAT

VAT: a very arbitrary tax

Key points

  • When VAT was introduced in 1973 it was the first of several new taxes.
  • Before VAT the UK had two sales taxes: excise duties and purchase tax.
  • The idea proposed in 2021 of replacing VAT with another indirect tax (a consumption tax) was unpopular.
  • VAT can still be a simple tax and VAT forms among the easiest returns to complete.
  • VAT is hard to evade.
  • The government is considering reforming VAT – making tax digital could be just the start.
  • VAT is here to stay – in future the main change is in digital accounting.

VAT was introduced in April 1973 as the first of several new taxes. It was quickly followed by capital duty (1973) development gains tax (1973) capital transfer tax (1974) petroleum revenue tax (1974) and development land tax (1976). These changes followed soon after the introduction of...

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