What Does The 20 Percent Vat Rate Mean To Uk Consumers And Businesses

The coalition Government's VAT increase could hit some of the poorest people in the UK and shadow chancellor Alan Johnson also believes this fact too

. When unveiling the VAT rise over the summer, George Osborne said it would raise more than 13bn a year by end of the parliament term. Although they will end up paying less VAT in total, lower income households spend a bigger share of their incomes on taxed goods, meaning they are proportionately harder hit.

A local charity shop in Leicestershire believes the increase in VAT means that we will need to raise an additional 7,000 in funds this year to ensure that they can continue to support the thousands of people who come for their help. The charity, Charity-Link, helps over 5,000 vulnerable children, young people, families and the elderly in the region each year.

The government says the rise is necessary to help bring down the UK's high budget deficit. Chancellor Osborne said it was a move that was more "progressive" than a hike in income tax or National Insurance.

It has been claimed that many retailers are planning to use the tax rise to "mask" more extensive price increases however; the VAT rise may spur a broader increase in the price of goods, according to a survey of 200 senior managers by accountancy group KPMG. It said 60% of retailers and consumer product manufacturers planned to increase their prices over and above the VAT rise. The tax rise will also increase the advantage of big online vendors, who avoid charging VAT altogether on small items by shipping them through the Channel Islands. This is possibly the most damaging tax avoidance scheme in the last decade, as it has a direct impact of virtually every single UK retail business.

But many large retailers have said they will pass through the cost of the tax rise only gradually, although many analysts believe this may just be because it is not feasible for them to raise all of their prices overnight.

The British Beer and Pub Association (BBPA) predicted that up to 10,000 jobs could go in the brewing and pub sectors as VAT compounded a concurrent tax hike on beer. With a ten pence tax increase on a pint in the past year, duty and VAT on a pub pint is now 77 per cent higher than in January 1997.

The VAT rise is also a worry for the Bank of England. At 3.3%, the annual rise in the consumer prices index is already well above the Bank's target of 2%, and the increased VAT rate is likely to push inflation towards 4% this year, analysts say.

Member of the Bank's policy-setting committee, have voted repeatedly for a rate rise in recent months, to head off the inflation risk but other members think the high inflation is due to a number of one-off events, not least the VAT rise, and will subside once government austerity measures kick in.

Economically, its certainly going to be a tough time for UK businesses and consumers over the next coming months.

by: dan mendez

POST COMMENT

Why Business Credit Is One Of Its Key Assets When It Comes To Success Debit Card Instant Loans-Speedy Cash on Basis of Debit Card Why A Merchant Cash Advance For Business Funding Is A Solid Loan Alternative Strategy In Canada Unsecured Loans: - Provide instant cash without security Finding Business Checks, Printing Software That Puts Control On Your Side A Business Marketing Blog Can Be Another Real Time-saver Small Businesses - Measuring Business Performance From The Financial Perspective Take refuge in a Lawsuit Cash Advance when faced with a lengthy legal proceeding Finding The Right Computer For Your Business Needs Serviced Apartments for the Business Traveller Easy to Use Video Marketing Suggestions for Your Online Business Are Cash Advance Loan Fees Worth It 6 Month Payday Loans– Use Loan Cash up to 6 Months