PRIME MINISTER David Cameron has admitted that his government’s decision to raise VAT to 20% to help tackle the budget deficit could be described as “regressive”.
The coalition has raised VAT to 20% from 17.5% this year as part of efforts to reduce a budget deficit running close to 10% of national output, Reuters reported.
The coalition has argued that its programme of public spending cuts and tax hikes is meant to avoid unfairly hurting the poor. But Labour politicians and some analysts disagree.
“If you measure the nature of this tax by how people spend, it does affect relatively better-off people a bit more than relatively less well-off people for the very simple reason that VAT isn’t applied to food or children’s clothes,” Conservative leader Cameron said yesterday during a question and answer session with the public.
“But if you look at income… then, yes, it is regressive. So it depends whether you are looking at expenditure or if you’re looking at income.”
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