Michael Gove’s plan to scrap VAT is a big mistake

When I read about Michael Gove’s plans to abolish VAT and replace it with a US-style Sales Tax, I thought: “Is he on drugs?” Gove’s views on experts have often been misrepresented. His infamous attack was aimed at a subset who haven’t been held accountable for failed predictions, not on the very idea of expertise. In fact, his scepticism of over-confident forecasts was influenced by the research of Prof Philip Tetlock, an expert on forecasting.

Yet, while he isn’t the post-truth, anti-expert that his opponents paint him as, he happens to be promoting a policy opposed near-universally by tax experts. It is not often the head of Tax Justice UK and the former executive director of the Adam Smith Institute see eye-to-eye, but they agree on this.

In theory, VAT should be economically identical to a well-functioning retail sales tax. They are both taxes on final consumption. But when administered in reality, retail sales taxes are harder to enforce.