{"id":93958,"date":"2026-07-16T07:17:10","date_gmt":"2026-07-16T06:17:10","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=93958"},"modified":"2026-07-16T07:17:10","modified_gmt":"2026-07-16T06:17:10","slug":"vat-is-regressive-so-why-are-the-oecd-recommending-it-be-increased-in-the-uk","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2026\/07\/16\/vat-is-regressive-so-why-are-the-oecd-recommending-it-be-increased-in-the-uk\/","title":{"rendered":"VAT is regressive, so why are the OECD recommending it be increased in the UK?"},"content":{"rendered":"

The FT reported<\/a> last night that:<\/p>\n

Increasing VAT would be the UK government\u2019s best option to raise revenue fast if the public finances veered off course, the OECD said on Wednesday.<\/p><\/blockquote>\n

They added:<\/p>\n

In a new report on the UK economy, the Paris-based organisation gave a stark assessment of the fiscal challenges awaiting Andy Burnham when he becomes prime minister next week.<\/p><\/blockquote>\n

They added<\/p>\n

[I]f a tax increase became \u201ca last-resort necessity\u201d, raising VAT would be the \u201cmost prudent\u201d way to limit the damage to the economy, the OECD said.<\/p><\/blockquote>\n

This is disastrous advice. The right answer to what is required if additional tax revenue is required in the UK is the recommendations made in the Taxing Wealth Report<\/a>. They are progressive, imposing any additional demand on those best able to pay, and would deliver tax and social as well as economic justice as a result.<\/p>\n

Instead, what the OECD is proposing is a deeply regressive tax, which I define in the glossary to this blog as:<\/p>\n

A\u00a0regressive tax<\/a>\u00a0is one where as a person's income increases the amount of that tax that they pay reduces in proportion to that income even if it increases in absolute amount, i.e. their percentage tax rate falls as their income goes up. Compare with\u00a0progressive taxes<\/a>\u00a0and flat taxes.<\/p><\/blockquote>\n

This is, of course, the case with regard to VAT. Those on low incomes in the UK spend almost all their earnings, and will therefore be hit by high rates of VAT in proportion to their income. In contrast, almost by definition, those with higher income and wealth do not spend all their incomes, and much of what they buy does not carry VAT, as the tax is heavily biased in favour of wealth. I explained this in a recent video<\/a>.<\/p>\n

I know there are those who do not agree. The Institute for Fiscal Studies has argued otherwise, but to make their wildly inaccurate claim that VAT is progressive, they defined it in proportion to spending. If you rig the data, you get outcomes as misleading as those that the IFS have claimed on this issue.<\/p>\n

In 2011 I wrote a report challenging their view, backed by data. Nothing much has changed since then. That report is available here.\u00a0<\/a><\/p>\n

The world's tax economists hate ordinary people; their recommendations make that clear. They also hate tax justice. They are biased to wealth. Expect Shabana Mahmmord to listen to them if she is Chancellor.<\/p>\n

I am very worried.<\/p>\n","protected":false},"excerpt":{"rendered":"

The FT reported last night that: Increasing VAT would be the UK government\u2019s best option to raise revenue fast if the public finances veered off
 Read the full article…<\/em><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[204,35,16,147,224,78,106,97,34],"tags":[],"class_list":["post-93958","post","type-post","status-publish","format-standard","hentry","category-economic-justice","category-economics","category-ethics","category-inequality","category-neoliberalism","category-oecd","category-politics","category-tax-justice","category-vat"],"_links":{"self":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/93958","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/comments?post=93958"}],"version-history":[{"count":3,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/93958\/revisions"}],"predecessor-version":[{"id":93961,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/93958\/revisions\/93961"}],"wp:attachment":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/media?parent=93958"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/categories?post=93958"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/tags?post=93958"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}