Eric King: Higher taxes are a trend around the globe in developed countries. The west is mired in an extremely harsh economic cycle, but politicians never learn. They love to tax, and when coffers run dry the solution is to tax more. When you are faced with this type of cycle, coupled with increased taxes you are guaranteed a depression.
By Andrew Atkinson
June 22 (Bloomberg) -- British Chancellor of the Exchequer George Osborne increased the value-added tax rate to 20 percent from 17.5 percent in the first permanent change to the levy on sales of goods and services in almost two decades.
“The years of debt and spending make this unavoidable,” Osborne told Parliament in London in his emergency budget today as he announced a package of spending cuts and tax increases to cut the U.K.’s record deficit.
The rate will increase from January and produce more than 13 billion pounds ($19 billion) a year of extra revenue by the end of this Parliament in 2015, Osborne said. “That is 13 billion pounds we don’t have to find from extra spending cuts or income-tax rises,” he said.
The VAT increase dwarfed other revenue-raising measures in a budget that sought to all but eliminate a deficit that reached 11 percent of gross domestic product last fiscal year.
The tax generates about 15 percent of total government revenue and retailers say the rise may dampen consumer spending as the economy emerges from its worst slump since World War II. CLICK HERE to continue reading this article from Bloomberg.
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