Jaffa Cakes

Cake or biscuit? The UK's byzantine VAT system explained

Published on 16 November 2023

This week, we dive into the oddities of the VAT system.

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From jaffa cakes and gingerbread men, to fur skin coats and children's clothes, our VAT system and its byzantine rules seem, on the surface, to be a fun quirk of the UK tax system.

But dig deeper, and one finds economic distortions and inefficiencies due to the complex way the UK's third largest tax is levied.

Leading us through this maze of complexity are Helen Miller, IFS Deputy Director and tax expert, and Dan Neidle, a tax lawyer and founder of Tax Policy Associates.

Zooming In: discussion questions

Every week, we share a set of questions designed for A Level economics students to discuss, written by teacher Will Haines.

1. Using an example, explain the challenge in identifying goods which are and are not subject to VAT. 
2. Why is removing VAT from certain goods not the most effective way of redistributing income? 
 3. Having listened to this episode, what changes would you make to the current VAT system and how effective do you think they would be? 

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