Newspaper article The Evening Standard (London, England)

Ofgem Adviser: Big Energy Users Should Be Paying VAT at 20%

Newspaper article The Evening Standard (London, England)

Ofgem Adviser: Big Energy Users Should Be Paying VAT at 20%

Article excerpt

Byline: Jonathan Prynn

FAMILIES who use large amounts of gas and electricity should be hit with a higher level of VAT on their energy bills, according to a senior adviser at industry regulator Ofgem.

Economist David Osmon, writing in a personal rather than official capacity, said the "progressive" system of tax "would yield spectacular benefits" by reducing energy consumption and raising more tax.

In a paper for the Economics Lab think-tank, Osmon proposed dropping VAT altogether for standing charges, keeping the current 5% rate for consumption up to "average" levels but raising it to 20% for above average usage.

He has calculated that the system would reduce overall energy demand by 2%, cut energy bills on all but the biggest users of by an average of PS7 and increase Treasury revenues by around PS1.1 billion.

He said: "The beauty of progressive VAT lies in its simplicity. You gain all these benefits by just altering slightly the prices that consumers face. …

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