Reduction of VAT from 17.5% to 15% — 17 Dec 2008 at 16:05

The majority of MPs voted in favour of reducing the VAT rate from 17.5% to 15%.

They did this by voting against the motion^[1] to annul the Order (Statutory Instrument) laid before the house for the reduction of the rate by fourteen and two sevenths of a percent (2.5 out of 17.5) which came into force on 1 December 2008.^[2]

The Order was made under the powers in Value Added Tax Act 1994^[3] where it says:

• The Treasury may by order increase or decrease the rate of VAT for the time being in force by such percentage thereof not exceeding 25 per cent. as may be specified in the order, but any such order shall cease to be in force at the expiration of a period of one year from the date on which it takes effect, unless continued in force by a further order under this subsection.

This explains the strange formulation of the tax change statement, as well as the reason varying the VAT was chosen -- the powers to do it require the minimum of Parliamentary hassle.

As part of the order, the VAT on imported works of art went up from 28.58% to 33.34%,^[4] which is compensatory increase by fourteen and two sevenths of a percent.

If I'm guessing right, this issue is going to be all over the next election about "How the Conservatives voted against a tax cut" in 2008, and it will go on and on and on to the point that nobody understands it and it doesn't matter.

• [1] Vince Cable MP, House of Commons, 17 December 2008
• [2] The Value Added Tax (Change of Rate) Order 2008, 24 November 2008
• [3] Section 2(2) (Rate of VAT), Value Added Tax Act 1994
• [4] Value on Imported Goods, Section 21, Value Added Tax Act 1994

Debate in Parliament | Source |