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The current system of Value Added Tax is overly complex and should be simplified, with the tax applied to more categories, says a report by the Institute of Fiscal Studies.
It says that the move would simplify indirect taxation and raise money which could be spent on cutting income taxes and raising benefits.
Some of the other suggestions set out in the review include:
Many items including domestic gas and electricity attract VAT at a rate of 5% instead of the more usual 17.5% (205 from January) while others, such as new housing, children’s clothing, food and books are taxed at 0%.
Extending VAT to most spending would “reduce complexity and avoid costly distortions to consumption choices”, the report said.
