Call for proposals: VAT reform in the UK

An assessment of the VAT compliance burden across 47 member countries of the Forum on Tax Administration in 2017 found that the UK’s VAT compliance burden is higher than that in countries with a ‘modern VAT system’, such as Singapore, New Zealand and Australia.

This complexity hinders effective policy making and enforcement, leading to inefficient tax collection and administration. In recent years, we have seen the creation and extension of zero rates for women’s sanitary products and e-books, despite a consensus among economists and academics that a broad VAT base (and a lower rate) optimises the efficiency of the tax.

The complexity of UK VAT is a barrier to HMRC’s efforts to digitalise the tax, with digitalisation in the UK lagging behind many international peers. It is no coincidence that the country with one of the most digital tax systems in the world, Estonia, also has one of the simplest tax systems in the world.

How can the UK's VAT system be reformed to make it fit for the challenges of the 2030s?

This call for proposals seeks research that considers the underlying reasons for the challenges outlined above and explores how simplification can facilitate easier compliance, reducing administrative costs and attracting inbound investments by creating a more business-friendly tax environment.

Authors are invited to propose approaches to address these challenges, such as the adoption of digital technologies in tax administration or streamlining VAT rates to remove unnecessary exemptions and zero rates. Research could explore the impact of a modernised VAT system on consumer behaviour, economic growth and/or fiscal stability.

We encourage submissions that draw on international examples of successful VAT reforms and how these lessons can be applied to the UK context, considering also the evolving global economic landscape and the UK’s post-Brexit environment.

This call for proposals seeks to collate innovative and practical ideas for reforming the UK VAT system, laying the groundwork for more detailed research and policy development.

Suggested areas of focus (not exhaustive):

• Streamlining VAT: propose methods for simplifying the VAT system, drawing inspiration from simpler global models to enhance compliance and understanding.
• Digital innovations in VAT compliance: explore the potential of digital technologies, such as real-time reporting, to improve VAT efficiency and tackle evasion.
• Impact of VAT on SMEs: analyse the effects of VAT on small and medium-sized enterprises in the UK, with a focus on compliance hurdles and potential support mechanisms.
• VAT and environmental sustainability: investigate the role of reduced VAT rates on eco-friendly products and services in promoting environmental objectives, or how VAT operates within a circular economy.
• VAT in the digital economy: examine the adaptation of VAT to the expanding digital economy, including digital services and e-commerce.

Language: English

Eligibility: Open to all (submissions from international contributors are welcome)

Proposal requirement: Submit a detailed proposal, not exceeding 2,000 words, that addresses the specified question.

Submission deadline: 31 August 2024

Submissions should be accompanied by a CV and a completed application form.

The author of the selected proposal will be awarded £5,000 and the opportunity to present their research at a prestigious VAT conference to be held at Chartered Accountants’ Hall in London in 2025.

Accepted papers will be published on ICAEW's website, providing authors with further exposure for their work, and authors are encouraged to complement this by writing an 800-900 word practitioner-friendly piece on their research findings and recommendations for ICAEW’s insights channel.