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SAVE ON TAXES

Under EU law, the standard rate of VAT in any EU state cannot be lower than 15%.Each state may have up to two reduced rates of at least 5% for a restricted list of goods and services. The European Council must approve any temporary reduction of VAT in the public interest.

The default VAT rate is the standard rate, 20% since 4 January 2011. Some goods and services are subject to VAT at a reduced rate of 5% (such as domestic fuel) or 0% (such as most food and children’s clothing).

VAT is an indirect tax because the tax is paid to the government by the seller (the business) rather than the person who ultimately bears the economic burden of the tax (the consumer). Opponents of VAT claim it is a regressive tax because the poorest people spend a higher proportion of their disposable income on VAT than the richest people.Those in favour of VAT claim it is progressive as consumers who spend more pay more VAT.

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