Small Business Owners Unhappy With UK VAT Rise

When trying to get elected, politicians generally either promise lower taxes or avoid the subject.  The average person just won’t support tax hikes.  And now that the UK government’s increased the VAT (value added tax) from 17.5 percent to 20.0 percent, the majority of small business owners say the change will have a negative effect on their companies.

FreeIndex.co.uk issued a statement on the subject today, indicating that 64 percent of small business owners who participated in a survey believe the increase will have a detrimental impact.  Just 5 percent of owners think the change might help them somehow.

Those people might represent an unusually optimistic sample, too.  Indeed, the Federation of Small Businesses conducted another study, and found that 71 percent of small business owners think the VAT rise will be "unbeneficial" to their firms.

Expected consequences include increased prices (52 percent), lower turnover (45 percent), and loss of customers (36 percent).

John Walker, National Chairman of the Federation of Small Businesses, stated as a result, "If the Government truly believes that the private sector is going to strengthen the recovery we need to see action.  Increasing the threshold at which companies have to register for VAT will put almost £900 million back in the pockets of small businesses.  Without this small firms will struggle to bounce back as the spending cuts start to bite."

Let’s hope that doesn’t turn out to be the case.