Proportional Tax

This is also known as a flat tax. It is applied to earned income regardless of how much the taxpayer earns.

Is VAT a regressive or progressive tax?

  • value-added tax (VAT) is a tax on consumption.  A VAT is therefore regressive if it is measured relative to current income and if it is introduced without other policy adjustments.   A VAT is less regressive if measured relative to lifetime income.

  • A progressive tax: Progressive means increasing in rate as the taxable amount increases.  It is one that takes a higher percentage of income from the high-income earner than from the low-income earner. e.g., PAYE

  • A regressive tax: Regressive means the rate decreases as the amount increases.  It is one that takes a higher percentage of income from the low- income earner than from the high-income earner, eg. VAT.


Value-Added Tax (VAT) is a tax, which is payable on sales of goods or services within the territory of the Member States of the EU.  The tax is ultimately payable by the consumer.

“VAT is a tax on consumer spending so everyone who pays for good and services pays VAT. It is built into the cost of many commonly consumed items such as clothing and petrol, so you don’t see what percentage of VAT you are paying.  However, when you are buying items such as computers, electricity and professional services, you will see the amount of VAT and the rate at which you are being charged on your bill.

 It  is charged at every stage of sale where the cost of an item is increased.  The standard rate of VAT has reduced from 23% to 21%, effective from 1 September 2020 to 28 February 2021. 

VAT is charged at different rates for various goods and services:

  • They include alcohol, audio-visual equipment, car parts and accessories, CDs, computers, consultancy services, cosmetics, detergents, diesel, fridges, furniture and furnishings.

  • 13.5% is a reduced rate of VAT for items including fuel (coal, heating oil, gas), electricity, veterinary fees, building and building services, agricultural contracting services, short-term car hire, cleaning and maintenance services.

  • 9% is a special reduced rate for newspapers and sporting facilities. This also includes e-books and electronically supplied newspapers.

  • 0% (Zero) VAT rating includes all exports, tea, coffee, milk, bread, books, children’s clothes and shoes, oral medicine for humans and animals, vegetable seeds and fruit trees, fertilisers, large animal feed, disability aids such as wheelchairs, crutches and hearing aids.”

    Citizens Advice Information

Leave a Reply