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Old 29-01-2007, 14:33   #3
Billcat
Foreign Correspondent

 
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Re: A Radical Suggestion

I think that the proposal might well hurt some major portions of the UK economy, while benefitting those industries in other countries.

Not sure what goods are in the National Basket, but I'm pretty sure that a lot of services that tourists purchase (hotel rooms and restaurant meals) are not. Increasing the VAT on these items to the proposd 45% would probably make the UK so expensive that the tourist industry would lose out in a pretty significant way, as tourists would choose other, affordable, non-UK options. Given the importance of the tourism industry to the UK economy, I think that the 45% VAT rate is a non-starter.

However, if implemented at 45%, it might benefit the USA tourism industry quite a bit. The pound is currently in a very advantageous position versus the dollar. Figure in the VAT savings that folks from the UK could realize (in addition to the savings from the exchange rate) by taking their vacations in the USA, and I think that the USA would do very well out of the deal!
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