THE EFFECTIVENESS OF VAT IN GENERATING REVENUE FOR THE UK GOVERNMENT FROM 2013 TO 2023

Abstract

This research delves into how valuable value-added tax (VAT) was in generating revenue for the UK government between 2013 and 2023. The study concentrates on the impact of economic indicators such as inflation, unemployment, and GDP growth on VAT revenue. The study aims to understand the impact of these factors on VAT revenue and how changes in policies during this timeframe affected tax collections. By analysing data from Her Majesty’s Revenue and Customs (HMRC) and the Office for National Statistics (ONS), the study uses multiple regression analysis to investigate these relationships. The results indicate a link between VAT revenue and inflation, a significant negative association with unemployment, and a less pronounced correlation with Gross Domestic Product (GDP) growth that is not statistically significant. These findings suggest that VAT is more responsive to changes in inflation and employment rates than economic expansion. This research challenges views on what drives VAT revenue, emphasising the importance of considering economic circumstances when formulating VAT policies. It recommends exploration of these dynamics across scenarios and longer time periods.