Sales tax in Britain has just gone up to its highest ever as part of the effort to bring down the country’s huge budget deficit.
VAT – or Value Added Tax – on most goods and services has risen from 17.5 percent to 20 percent.
UK finance minister George Osborne said the alternatives – higher income or payroll taxes – would make the British economy less competitive: “I think the VAT rise is a tough, but necessary step in getting Britain back on the road to economic recovery.”
The Labour Party opposition, which was in power until May, has warned that the VAT increase will actually cost Britain more jobs.
Labour leader Ed Milliband said: “It is the wrong tax at the wrong time for our economy and for our country.”
One price comparison website calculated the rise will cost each British household the equivalent of around 610 euros a year.
Shoppers were not looking forward to the VAT rise. One said “I’m unhappy about it going up obviously, it has an impact on everything you buy.”
Another complained he would not be able to afford it on a fixed income: “It’s a lot of money, especially when you are on a pension.”
The Office for Budget Responsibility – a government watchdog – has calculated the tax increase will cut Britain’s economic output this year and next by nought point three percent.
Sales tax in Italy is also 20 percent, in France it is 19.6 percent and in Germany 19 percent.