By Max Clarke

Members of the UK200Group of independent accountancy and lawyer firms have commented on today’s rise in the standard rate of VAT.

David Whiscombe, partner of BKL Tax said:

“It’s a reflection on human nature that although cutting the VAT rate by 2.5% seems to have had no discernible effect on spending, increasing it by 2.5% is likely to generate a ‘feel-bad’ factor quite disproportionate to the numbers. That said, it’s difficult to see what less damaging alternative the government could have chosen: simply ignoring the budget deficit and hoping it all comes out right in the end is not a credible or responsible option “

Dragon's Den star James Caan also spoke in favour of the increase, calling the VAT increase "unfortunate but unavoidable".
"We have to remember why the coalition has had to make this change in the first place. If we can reduce the huge deficit in Government spending we will all benefit from a healthier economy.” He explained.

David Ingall, a partner at JWPCreers commented:

“Putting VAT up was the least of a number of evils. Higher-rate taxpayers have taken a hit on tax rates and National Insurance, while employers have taken a hit on employers’ NICs, so those increases would have been even higher but for the VAT increase. Where petrol and diesel are concerned there is also the fuel duty. Perhaps there is a case for easing back on the fuel duty as VAT is collected on top of that, if only as a political decision, as we have all seen prices increase daily over recent weeks. It would be good news for all drivers and for the road transport industry which must be in complete confusion on how to price.”

Jonathan Russell, partner at ReesRussell and vice-president of the UK200Group:

“Whilst great marketing play has been made on the VAT increase by the 'Big Ticket' retailers here it probably will make little difference, as 2.5% has little impact against the huge discounts often available." Said Jonathan Russell, partner at ReesRussell and vice-president of the UK200Group.

"However", He argues, "the impact will be on everyday items where the retailers have little margin and the increase will have to be passed on immediately. Fuel is the big item here and will have an immediate impact on the private individual which will lead to a squeeze on cash available for other items. Because VAT ultimately only sticks with the final customer it will be the retailers who feel the effects first, on top of the already depressed retail market, but this will then pass back up the supply chain.”

James Abbott, tax partner, Baker Watkin:

“Consumer spending is such a large proportion of UK GDP and I understand why there may be concerns about tax rises directly hitting this sector. However, I believe any lasting impact on spending come Summer 2011 will be minimal. Being pragmatic, I have to say I believe it is the right way to raise additional tax revenue at this time. The poorest will be partly protected from the increase as many essentials are zero rated for VAT purposes or have VAT at a reduced rate at 5%, unchanged from 2010. As VAT is a tax on consumption, those who spend the most will pay the most.”

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