The VAT compliance burden in the UK : a comparative assessment

Abstract

This article explores the compliance burden imposed by the value added tax (VAT), which has traditionally been recognised as one of the more onerous taxes so far as compliance by business taxpayers is concerned. It compares the UK’s VAT compliance burden with that experienced elsewhere in the EU, together with the experience of other Organisation for Economic Co-operation and Development and Forum on Tax Administration countries. Based upon the outcomes of a large-scale research project conducted in 2018–19 using an experimental diagnostic tool, the UK appears to have mixed results, comparing poorly in relation to certain factors but outperforming many of its European and global counterparts in relation to other aspects of its VAT regime. The results are of particular interest to UK policy makers and practitioners as they establish that the most significant sources of compliance burden lie in the design of the underlying VAT law rather than in its administration. The UK’s withdrawal from the EU may offer a once in a generation opportunity to effect real change and make meaningful reductions to the business compliance burden which could provide lasting improvements to the internationally competitive position of UK businesses. The importance of addressing the current causes of the compliance burden becomes all the more pressing in the face of pending new costs UK businesses will face post-Brexit. The freedom created by Brexit in terms of VAT design should be exploited to achieve compliance burden reductions needed to offset new costs likely to arise in the post-Brexit era.