UK Chancellor Sunak plans emergency cut in VAT to rescue ailing economy – Sunday Times

UK Chancellor Rishi Sunak is expected to take another leap in supporting the British economy. The Finance Minister is expected to roll out further measures in the form of reducing the Value Added Tax (VAT) during the next month, as per Sunday Times.

Key quotes

Rishi Sunak is ready to slash VAT and pump billions into the economy as the government prepares to ease social-distancing rules.

The chancellor has ordered officials in the Treasury and HMRC to prepare options to reduce the sales tax, including a cut in the headline rate, and zero rating more products for a fixed period.

In private briefings last week, Treasury officials pointed out that Sunak could lower VAT and business rates at the stroke of a pen when he makes a planned speech on the economy in early July.

There is a precedent for cutting VAT in a crisis. Alistair Darling, the then Labour chancellor, reduced it from 17.5% to 15% for 13 months after the 2008 crash.

FX implications

Although the early morning in Asian markets restricted the traders’ reaction to the news, this should be considered as a positive for catalyst the GBP/USD pair. However, the present risk-off mood might offer a little help to the Cable. That said, the pair trades around 1.2347 as we write.