VAT affects the poor more than the rich
Britain's poorest households are spending more on VATable items than they were 25 years ago, while the figure for better off families is unchanged, new figures have claimed.
A study from the Office for National Statistics (ONS) showed the poorest fifth spent 55 per cent on goods and services that incurred VAT in 2009/10, compared with 45 per cent in 1986.
In contrast, there was no marked change in the proportion of expenditure on VATable items for the richest fifth of households over the period.
Changes in spending patterns mean the poorest fifth of households spent around 250 per cent more on new cars, holidays abroad, meals out, audio/visual goods and photographic equipment in 2009/10 than in 1986, the study added.
This is compared with an increase of 20 per cent for the richest households.
Commenting on the figures, David Breger of accountancy firm HW Fisher said: "This latest piece of research reinforces what is widely perceived to be the fundamental inequality at the heart of VAT: the poorer pay more of it relative to their incomes than the wealthy.
"It's clear that the government needs to reconsider the full effect of VAT, which is inherently regressive. But as yet nobody has been able to come up with a suitable solution.
"In a strong economy, VAT is arguably less of an issue but at the current time, in a desperately weak economy, its effect on households' incomes is being significantly magnified," he added.
The research - which was collated using data from the Living Costs and Food Survey - extends to 2010 and does not include the current 20 per cent rate of VAT introduced in 2011 as a result.
In 1986 VAT stood at 15 per cent and was 17.5 per cent in 2009 and 2010 before January's increase.
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