VAT changes could create jobs, boost family finances and help the environment

21 September 2016

George Bull

It’s been interesting to see the apparent willingness of the Chancellor of the Exchequer Philip Hammond to change the fiscal policies of his predecessor. With the Autumn Statement now set for Wednesday 23 November, we will soon be publishing our recommendations for the tax changes we would like to see the Chancellor make. For now, inspired by moves being made in Sweden, we hope the Chancellor will consider a VAT change which could make a world of difference.

From the beginning of 2017, the Swedish government will cut the rate of VAT on repairs from 25 per cent to 12 per cent. The aim is to encourage Swedish citizens to throw away fewer household items and to have more repaired. Apparently, tax refunds will also be offered to people who have their white goods, things like dishwashers and washing machines, repaired instead of scrapping the old ones and buying new. This makes a lot of sense to the Swedish government who are keen to reduce consumption in the interests of averting climate change.

With Brexit just around the corner, it seems to us that this could work particularly well for the UK economy too. If the UK followed the Swedish approach, more jobs would be created in the repairs industry, less waste would go to landfill and family finances would be boosted because repairs will generally cost considerably less than replacements. At a time when there are fears of job losses and rising import costs reflecting a week pound, this could be very beneficial to the UK economy. And the best of it is that the current EU Directive already allows member states the discretion to apply reduced rates of VAT to a specific range of goods and services. So the UK could make a start on this without having to wait for Brexit. What’s not to like?

For more information please get in touch with George Bull, or your usual RSM contact.