This was before a two percentage point increase in the VAT in July 2010.
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"The three-point rise in VAT in January has dampened economic growth, but it hasn't proved to be catastrophic, " he said.
The directive allows for reduced VAT in several areas including water, food, audio books, restaurant service, gardening, nappies and energy itself - but not energy-saving products.
Plaid Cymru AM Simon Thomas called on the UK government to temporary cut VAT in order to help those struggling to cope in the current economic climate.
Companies that cross a certain threshold will be forced to register for VAT in the EU, while smaller firms are expected to continue to be exempt from the tax.
The Tories have denied Labour's claims that they will need to raise VAT in order to cover the costs of not raising their planned raise in National Insurance contributions.
The sting in the IMF tail appeared to be calls for the government and the bank to do more to protect the poor, get credit to business, invest more in infrastructure and, if growth continues to flatline, to consider a temporary cut in VAT in future.
The drivers want a 5.83% rise in fares which Mr Khan said would "take into account the rises in VAT since our last rise in 2008, and also the proposed 1% fuel duty due in April".
For Labour, shadow chancellor Ed Balls told BBC News the VAT rise in January had already put fuel prices up.
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VAT, in order to ensure that Portugal does not flout the deficit ceiling of 3% imposed by the euro-zone's stability pact.
The car industry welcomed the cut in VAT and said that car prices in showrooms would begin to fall from next week.
And they can point out that Labour refused to rule out a VAT increase in their manifesto - though the leadership challenger Ed Balls says this was a mistake, and they should have done so.
Now the Lib Dems have decided jointly to detonate the VAT bombshell in government - up from 17.5% to 20% - and will have to try to ensure this doesn't blow up in their faces.
It is too early to say if this is due to slacker compliance, but Professor Giannini says that in late 2008 there was a suspicious mismatch between a fall in VAT receipts and a smaller drop in consumption.
Mr Miliband also called for the development of enterprise hubs to facilitate business co-operation as well as increased investment in infrastructure and an immediate cut in VAT to stimulate demand and give a short in the arm to struggling businesses.
One odd but significant consequence of a hike in the VAT will likely be seen in the market for inflation-protected securities that adjust payouts based on consumer prices.
They feel that with the prospect of a hung parliament at the next general election, the increase in VAT and other higher taxes looming, along with cuts in public spending, we could be in for a rougher ride than in 2009.
It wasn't just because the cut in VAT was such a misguided way of stimulating demand when prices in the shops were already falling.
Perhaps the greatest impact of a rise in VAT will be on retailers which are likely to see a drop in sales volume.
But Exchequer Secretary David Gauke pointed out former Chancellor Alistair Darling, according to former Business Secretary Lord Mandelson's memoirs, favoured raising VAT - and challenged him to explain why "so few" Labour MPs voted against an increase in VAT last year.
Among the measures are a 3% rise in VAT, higher income tax for top earners, and no protection from dismissal for the first two years in employment.
The IMF says a shortfall in VAT receipts suggests some firms are not complying.
Of course, the same applied in spades to the increase in VAT a few years ago.
MPs debated a similar amendment calling for a cut in VAT tabled by Plaid Cymru's Jonathan Edwards.
The measures include a 2% increase in VAT to shore up government finances.
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The Scottish Building Federation took a negative view of the Budget, in particular the rise in VAT early next year.
He used false invoices to avoid paying tax on computer parts which were bought VAT-free in the Republic of Ireland.
However, a VAT would result in a smaller increase in marginal tax rates on labor than an income tax rate hike.
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Shadow chancellor Ed Balls has called for a temporary emergency cut in VAT to boost consumer confidence and "jump-start" the economy.
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