Facing a slump, Britain cuts sales tax and plots higher levies on rich
Value-added tax, similar to Canada's GST, falls to 15% for next 13 months
Britain is cutting its national sales tax by 2.5 percentage points for 13 months to stimulate consumer spending and is speeding up $5.6 billion worth of public works in the face of worldwide economic jitters.
But it is raising taxes right away on gasoline, alcohol and tobacco, saying fuel prices are down from their summer peaks and cash is needed to offset the temporary sales-tax cut.
That cut will shrink Britain's value-added tax (equivalent to Canada's federal goods and services tax) from 17.5 per cent to 15 per cent as of Dec. 1. The lower VAT rate is to stay in effect through 2009.
The changes were announced Monday in a report by Chancellor of the Exchequer Alistair Darling, the British finance minister.
"In the face of recent global economic shocks, the government's immediate priority at this pre-budget report is to support the economy through these difficult times," the document says.
It says the $5.6 billion in accelerated spending will go for "housing, education, transport and other construction projects, supporting industries and jobs across the country" in tough economic times. The money will be taken from the government's 2010-11 bookkeeping year (which begins in April 2010) and spent in the coming year and a half "when the impact of the shock is likely to be the strongest."
The soak-the-rich angle includes a new top tax rate of 45 per cent on annual incomes above $280,000 starting in April 2011, assuming Labour is in power to impose it. The top bracket has been 40 per cent since former Tory PM Margaret Thatcher slashed rates in the 1980s.
The document also outlines steps to help taxpayers in the lowest bracket, pensioners and children, promising that those with incomes below $75,000 a year will pay less in tax and national insurance contributions in April 2011 than in April 2008.