Supporting a Progressive VAT: A Fairer Tax System

Backing the proposal, policy experts and campaign groups argue a progressive VAT would address a long-standing unfairness in the UK tax system. The current flat rate disproportionately burdens low-income families, who must spend most of their earnings on essentials like housing, transport, and basic goods. By introducing lower rates for necessities and higher rates for luxury purchases, or by offering income-linked rebates, the government could reduce inequality without losing revenue. For example, a reduced VAT on heating and public transport would directly help the poorest. Moreover, a progressive VAT could partially replace other regressive taxes, such as council tax, which is based on property values from decades ago. The Treasury could also use the new system to encourage sustainable consumption, such as lower VAT on repair services and higher rates on environmentally harmful products. Opponents worry about complexity, but modern tax administration and digital tracking make it feasible. Countries like Canada use a harmonized sales tax with rebates for low-income households. The UK already has the administrative machinery through HMRC and Real-Time Information. A well-designed progressive VAT would make the tax code fairer, help tackle the cost-of-living crisis, and raise needed revenue for public services.