Q&A:  Which indirect taxes give the government to most revenue?

Which indirect taxes give the government to most revenue?

For the UK government value added tax provides the biggest source of revenue. In November 2008, VAT was cut from 17.5% to 15% on a temporary basis in a move by the government designed to stimulate consumer spending – the decision was said to be worth around £12 billion of lost tax revenue for the UK Treasury.

There are many other indirect taxes and our chart below highlights six of them. As you can see the flow of tax revenue from indirect taxes on tobacco provides a very important source of money for the UK government. Together these six indirect taxes add nearly £20 billion annually into the government’s coffers.

In a recession where consumer spending is falling and where there is a chance of a period of persistent price deflation, the UK government will see a fall in revenue from indirect taxes.

More revision notes on indirect taxes can be found here