UK lawmakers clash over sales tax hike

A proposed
increase in England’s
Value Added Tax from 17.5 to 20 per cent has raised the ire of some lawmakers.

George Osborne has defended the VAT increase, saying it could boost employment
and was better than raising income tax.

But Labour
leader Ed Miliband urged the government to apologise for suggesting that the
rate rise was a “progressive” policy.

The VAT rise,
which came into effect on Tuesday, will bring in an extra £13bn in revenue, the
Treasury says.

children’s clothing, newspapers and magazines are not subject to VAT.

It is the
second increase in a year, after Labour chancellor Alistair Darling restored
the 17.5% rate last January, having temporarily reduced it to 15% for 13 months
to stimulate the economy.

Research by
the Centre for Retail Research and online shopping group Kelkoo has suggested
that retail sales will fall by about £2.2bn in the first three months of the
year as a result of the rise in VAT.

The British
Retail Consortium has also warned that the rise, announced in the June Budget,
may have squeezed the traditional January sales period into a concentrated
burst around the New Year.