Consumers to pay higher tax than the biggest of UK banks

Consumers in the UK may soon have to pay a higher tax rate than the UK's biggest banks, the Trades Union Congress (TUC) says, referring to the new changes in corporation tax and VAT.

According to the TUC the tax changes mean UK consumers would start to feel the pinch from 4 January, when VAT increases to 20 per cent from the current 17.5 per cent.

Meanwhile, corporation tax is set to drop to 27 per cent from 28 per cent, in April. However, as per the TUC's calculations the effective corporation tax rate for large multinational companies – the headline rate minus the "various tax loopholes they are able to exploit to bring down their tax bill" dropped to 21 per cent in 2009.

The TUC further says, considering a 0.5 per cent fall in this effective rate each every since 2000, the corporation tax of big companies with operations across multiple countries could be as low as 19 per cent in 2011.

With the corporation tax and VAT moving in opposite directions, the UK tax system would be further skewed in favour of high-profit industries, such as banking over small and medium-sized enterprises, which the union says would be hit hart by the VAT increase, at a time when they were being refused loans by banks.

According to Brendan Barber, the TUC general secretary, shoppers looking for bargains in the January sales would soon be paying more to clear debts accumulated by the banks when they plunged the UK into recession and asked for a multi-trillion pound bailout.