Mirrlees Review: VAT is complex and inefficient

Date: 19th September 2011

Small businesses around the UK could be tempted to seek the assistance of a specialist accountancy service following the findings of a recent report.

The Mirrlees Review, conducted on behalf of the Institute for Fiscal Studies, has claimed that the country's VAT system is inefficient and needlessly complex.

One of the key criticisms of the system is that different types of spending are treated inconsistently.

Sir James Mirrlees, the report's author, claimed that while the VAT system favours financial services, it also carries "immense complexity" and should be replaced with an equivalent.

"This would reduce complexity and costly distortions to consumption choices," he explained.

"The money raised could be spent on cutting income taxes and raising benefits in a way which is broadly distributionally neutral and which protects work incentives."

Overall, Sir James lamented the UK's tax system, saying in its present form it reduces employment and earnings more than it needs to.

Posted Emily Smith