Think tank calls for VAT reduction

Date: 10th November 2008

A five per cent reduction in VAT is needed to help the UK economy through recession, according to an influential think tank.

The Centre for Economics and Business Research (CEBR) has called for the rate of indirect taxation to be reduced to 12.5 per cent until the end of year.

Doing so would cost the government £24 billion in lost revenue, but the net impact would be much less if it prevented recession from intensifying.

Douglas McWilliams, chief executive of the CEBR, said: "What is needed now is an early and possibly temporary tax cut.

"A reduction in VAT at least until the end of 2009 to 12.5 per cent would be a good start."

He also dismissed the theory that recession could be staved by more borrowing, adding that additional public works "would take too long to organise", though they may be part of the solution for later years.

In other news, business start-ups have until January 31st 2009 to file a self-assessment tax return online with HM Revenue and Customs.