Soon after large dealer group Pendragon said it would lose GBP30m this year, a trade association called on the UK chancellor (finance minister) to reduce a key tax.
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“A reduction in value added tax (VAT) [from the current 17.5%] would benefit both consumers and businesses, and give the economy a much-needed boost,” said Sue Robinson, director of the Retail Motor Industry Federation (RMIF), representing the UK retail motor sector.
The RMIF has written to the chancellor ahead of his pre-budget report, calling on him to reduce the rate to 12.5%.
A reduction in the rate of VAT would reduce retail prices, as well as costs for business, the RMIF said.
Robinson added: “A lower rate of VAT would help bring down prices without there being a negative impact on retailers. At the same time it would also help reduce costs for businesses.
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By GlobalData“A lower rate of VAT would immediately cut the price of major purchases. By effectively cutting around 5% from the price of a new car, and attendant maintenance costs, our recommended VAT reduction would be a step towards helping to revive the new car market.”
“With the treasury looking for ways to stimulate the consumer economy, we believe that this is a viable option and are strongly urging the chancellor to enact the move.”
Political commentators expect the chancellor to cut taxes in a bid to spur the UK’s flagging economy but have speculated this is more likely to be in the form of reduced income taxes.
