Call to axe VAT for sales levy

AMONG the ideas being floated ahead of this month's Pre-Budget Report by the Chancellor is one to dump value added tax. If it continues to be beyond the Treasury and Customs & Excise to simplify the tax, VAT should be scrapped and replaced by a sales levy, says the Association of Chartered Certified Accountants.

'It is unacceptable that UK businesses should have to pay high compliance costs and then pay all over again to fight legal battles with HM Customs & Excise because VAT law is so unclear,' the ACCA says.

Even when a company wins a case, the accountants allege, Customs & Excise blocks repayment of overpaid tax, saying it will not be possible to track down and reimburse the original customers who paid VAT.

A sales tax is different in that is paid only by the end buyer and should be simpler in that there is no need for everyone in the chain to account for the tax, as is the case with VAT.

Shoppers already pay a sales tax in the US and Japan, for example, and it is argued that a simpler version of the idea could be designed for Britain.

But even assuming a Chancellor, especially Gordon Brown, wanted to simplify a tax issue, it would be far from easy to make such a change without upsetting Brussels - VAT is a cornerstone of revenue-raising in the European Union.