Shop owners grow concerned over possible VAT increase

With an emergency budget expected in the next 50 days many shop owners and other small businesses have warned that VAT is likely to increase.

Many economists and city analysts are of the opinion that current VAT of 17.5% is likely to rise to as much as 20%. A Conservative Party report, previously leaked the day before the General Election, has added fuel to this opinion as it outlined Tory plans to increase VAT to 19.5%.

Many shop owners and retailers are very concerned that any hike in VAT could further damage consumer spending, that's already in a weak state, and push inflation to higher levels. Consequently, businesses around the UK are concerned that an increase in VAT could result in consumers fleeing the High Street, particularly at a time of high unemployment.

With announcements to raise the threshold for income tax and a new initiative in place to help reduce the current corporation tax burden, economists believe that this could cost the UK £10 billion per year. Tax measures such as increasing VAT and significant increases in Capital Gains Tax (CGT) are expected to help pay for these measures.

17/05/10