MacDonald backs FSB claims VAT rise will be detrimental to small businesses
Wednesday, 05 January 2011 06:09
SNP Candidate for Falkirk East, Councillor Angus MacDonald, has backed the Federation of Small Businesses claims that more than 70 per cent of small businesses expect Tuesday's VAT rise to have a negative impact on their business.
When the VAT rise to 20 per cent hit on January 4, an FSB ‘Voice of Small Business’ panel survey showed that just under three-quarters (71%) of the 1,600 respondents expect the rise to be unbeneficial to their business. A further 52 per cent expect to increase prices, 45 per cent expect a fall in turnover, and 36 per cent expect a loss of customers as a result.
The Chancellor has said that this rise is here to stay as it a change to the tax system to deal with the structural deficit. The FSB is urging the Chancellor to review the increase when the deficit has been significantly reduced and to return it to 17.5 per cent.
Small firms will be hit hard by the rise in VAT as unlike big businesses, they can’t absorb the increase. This will mean that small firms will have to pass the full cost on to customers, reduce stock levels or find cost savings elsewhere – potentially costing jobs and undermining the UK ConDem Government's private sector led recovery.
Falkirk East SNP Candidate Cllr Angus MacDonald has previously backed the FSB's calls for the UK ConDem Government to help alleviate the stresses and strains on hard hit firms’ cash-flow by increasing the threshold at which they begin to pay VAT, from the current rate of £70,000 to £90,000. This has the potential to create up to 35,000 jobs and help small businesses when they need it most.
Councillor MacDonald, the SNP's Economic Development spokesperson at Falkirk Council said:
"VAT has officially gone up to 20%, which will only lead to decreased consumer spending, failing businesses and subsequent job losses. This is clearly the wrong move at the wrong time. Small businesses have already had a tough time in 2010, which has been partly alleviated by the Scottish Government's Small Business Bonus which has saved 1579 of Falkirk district’s small businesses an average of £2801 over the period 2007-09. The UK Government must play its part as well, and an increase in VAT thresholds would help immensely. Without this small firms will struggle to bounce back as the spending cuts start to bite."