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IFS Report Lays Bare UK's Fiscal Challenges

by Robert Lee, Tax-News.com, London

29 November 2012


UK Chancellor George Osborne may need to hike the standard rate of value-added tax (VAT) as he struggles to meet his deficit reduction targets, the Institute for Fiscal Studies (IFS) has warned.

The claim is made in a new IFS report, "Autumn Statement 2012: more fiscal pain to come?", released ahead of the Chancellor's forthcoming Autumn Statement.

Anticipating a "pessimistic" scenario, the IFS believes that Osborne would need to announce further tax increases or spending cuts equivalent to GBP23bn (USD37bn) in order to meet his current fiscal mandate.

Were Osborne to plug this hole through taxation alone, the necessary changes would be equivalent to a rise in the headline VAT rate to 25%.

According to Carl Emmerson, Deputy Director of the IFS, if Osborne abandons any of his existing fiscal targets at the Statement, the planned era of austerity could run for eight years to 2017-18.

Osborne will deliver his Autumn Statement to parliament on December 5.

TAGS: tax | value added tax (VAT) | fiscal policy | budget | United Kingdom | tax reform

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