How Britain's high sales tax 'holds back economic recovery'British shoppers face one of the highest levels of sales tax in the worldAverage sales tax is 15.97%, higher than European average of 15.5%Among Western nations, only Netherlands had higher sales tax at 18.18%
01:00 GMT, 11 December 2012
Shoppers in Britain face one of the highest levels of sales tax and duty in the world, a study has revealed.
It says that with families unable to afford goods and services, the country will struggle to escape from the economic doldrums.
Experts put together a basket of goods, from a box of chocolates to an iPad, as well as an energy bill and a litre of petrol, to assess the average sales tax faced by families.
Expensive: Shoppers in Britain face one of the highest levels of sales tax and duty in the world
The UK figure was 15.97 per cent, which is more than the average of 13.8 per cent across the 22 countries surveyed by the accountants UHY Hacker Young.
It was also higher than the European average of 15.5 per cent, 12.3 per cent in the G8 group of the world’s wealthiest nations, and 8.2 per cent in the Asia-Pacific region.
Among the leading Western nations, only the Netherlands had a higher average sales tax rate at 18.18 per cent.
In Britain, VAT of 20 per cent on an item translates as a sales tax of 16.7 per cent of the purchase price. For example, a product worth 1 would carry VAT of 20p, selling for 1.20.
This means the buyer pays 20p of the 1.20 as sales tax – which is 16.7 per cent. Despite the cancellation of a fuel duty increase in last week’s Autumn Statement, some 57.7 per cent of the cost of petrol is made up from tax.
This compares with 22.1 per cent in the US, and the international average of 36.22 per cent.
Tobacco taxes are also particularly high in Britain, making up 76.8 per cent of the price of a pack of cigarettes, compared with 21.5 per cent in the US. The figure is 73 per cent in Germany, but a higher 80.2 per cent in Ireland and France.
Simon Newark of UHY Hacker Young said: ‘Like all countries with high sales taxes, the UK’s sales and consumption taxes are holding back the economy by putting pressure on disposable incomes.
‘VAT in the UK is now higher than even traditionally higher-taxing economies like Germany, where VAT is 19 per cent, and even France, where VAT is 19.6 per cent.
‘The UK also compares badly with other major economies like Australia.’
He added: ‘High sales and consumption taxes will have a particularly heavy impact on low earners, especially if they are on “necessity” goods like petrol.’