VAT rise 'will be passed on to consumers'

Wednesday, June 23rd 2010

The rise in VAT announced this week will prove to be bad news for small businesses and their customers, according to one organisation.

Commenting on chancellor George Osborne's decision to raise the tax from 17.5 per cent to 20 per cent from next January, the Federation of Small Businesses (FSB) says many firms will be forced to pass the increase on to consumers.

"Big firms have the cash flow available to not pass on all of the increases to their customers, which small firms do not have - especially in the current economic situation," explains a spokeswoman for the FSB.

While many companies agree the government must attempt to cut the deficit, the FSB remains doubtful the way to do this is by stifling those who wish to expand and employ more workers.

Mr Osborne also announced a range of changes to the benefits system in his first Budget as chancellor for the coalition government.