Monday, June 28, 2010

Shoppers could face VAT on food

By James Hall, Retail Editor Published: 9:00PM GMT 06 March 2010

Shoppers could face VAT on food Food sales from supermarkets are estimated to sum �120 billion a year Photo: EPA

The feasibility of introducing the food taxation is being lifted informally in in between polite servants, industry bodies and sell insiders.

So politically-sensitive is the move that all the talks are occurring "under the radar", according to sell industry insiders.

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Basic supermarket groceries are now defence from VAT, along with books, newspapers and children"s clothes.

However a VAT levy on food of in in between 3 and five per cent would lift billions of pounds in taxation and assistance revoke Government borrowings, that are approaching to strike �180 billion this year.

Food sales from supermarkets are estimated to sum �120 billion a year.

The taxation would be argumentative as it would disproportionately affect poorer families. Any move to levy it would be vehemently opposite by the UK"s large food retailers, who disagree that it would be a "tax on living".

Justin King, the arch comparison manager of J Sainsbury, pronounced this week end that a taxation on groceries would be a "very bad idea". Another supermarket comparison manager pronounced last night that the taxation would be "political dynamite".

The subject is being tentatively brought up in Whitehall as politicians, lobbyists and polite servants inspect probable ways of raising revenues, according to mixed sell industry sources.

An enlarge in title VAT on top of the stream 17.5 per cent turn is additionally being mooted.

One comparison industry comparison manager said: "VAT on groceries is being talked about in really indeterminate terms, rather than as a grave consultation. But it is function in all tools of Whitehall. It is spontaneous and sensitive. It is such a red prohibited topic."

"They are meditative the unthinkable. It competence not happen, but don"t think that people are not carrying that conversation. They are."

A Treasury orator pronounced that there was "absolutely no question" of the stream Chancellor commanding VAT on groceries.

"It is not remotely on the table," he said.

However polite servants are examining all the permutations accessible to the subsequent supervision to move in income following the election.

The food industry is opposite the move. Mr King said: "On food, VAT acts in a really backward way. The poorer you are, the higher the suit of your domicile income you outlay on food.

"So if you were to deliver VAT on food that would be really deleterious for the lowest in the society. So I think that would be a really bad thought and I think majority governments would assimilate that."

A second supermarket arch comparison manager said: "My perspective is that it would be all inappropriate. You are fatiguing what people have to eat to live. Groceries are not discretional spend."

He combined that if the new taxation were imposed, retailers would have to pass it on to business in the form of higher prices.

It is accepted that the British Retail Consortium (BRC) is in the routine of compiling a vital inform in to the stroke on the consumer economy on both approach and surreptitious taxation. The inform will be published before to the election.

Stephen Robertson, the director-general of the BRC, pronounced that a taxation on food could be deleterious to the mercantile recovery.

"My feeling is that it could be dangerous to request a stop on spending at this point in a really frail recovery," he said.

On Friday, John Lewis Partnership warned that shoppers are already heedful of higher taxes.

"Consumers will additionally be heedful that serve out they are really expected to face higher taxes as piece of the vital visual movement that will be indispensable to rein in the supervision finances. It has been mooted for e.g. that VAT could climb to 20pc," the tradesman said.

Late last year the National Institute of Economic and Social Research pronounced that family groups face the prospects of income taxation increases and carrying to compensate VAT on formerly free products such as simple food if the Government"s bill is to be balanced.