Coronavirus: UK chancellor eyes VAT cut
Chancellor Rishi Sunak arrives at Downing Street in London. Photo: Jonathan Brady / PA Images via Getty Images
British Chancellor Rishi Sunak is considering lowering VAT (VAT) to boost consumer spending in the face of pressure to boost the country's economy hit by the coronavirus pandemic, the FT reported.
This news does not come long after Sunak said that if Prime Minister Boris Johnson relaxed the two-meter rule of social distance, it would "make a huge difference" for companies.
The rule has been criticized by the hotel industry, which is pushing to lower the VAT rate, as is the retail trade.
In a letter to the Chancellor of the FT, Helen Dickinson, CEO of the British Retail Consortium, said that "temporarily lowering the sales tax rate and income tax for low earners would boost consumer demand and increase consumption."
Tax officials confirmed to the FT that the VAT plans are being discussed and no decision has been made.
READ MORE: Britain is trying to step up control of overseas acquisitions following a pandemic
Shops have already opened and bars and restaurants are expected to open next month. The Treasury Department will monitor spending levels to determine if a tax cut is needed to support spending, the FT report said.
While lower VAT will cost the treasury, Sunak is also working on plans for deferred tax increases and cuts in public spending in an autumn budget.
He is considering what measures to announce in a summer statement expected in early July and what to wait for the full fall budget, the report said.
The pandemic has hit the UK economy hard. Government borrowing hit a new record high in May, reaching £ 55.2 billion ($ 68.2 billion) and surpassing the newly revised £ 48.5 billion for April after new corona virus spending, according to new figures had been.
Meanwhile, the Bank of England launched further £ 100 billion of economic stimulus to combat the “unprecedented” shock of COVID-19 as it warned of an impending employment crisis.
A spokesman for the Treasury Department told Yahoo Finance: "We are not commenting on speculation and further action will be taken before the summer break."
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