V.A.T Increase

Today the Conservatives in the U.K hiked the V.A.T from 17.5% to 20%. V.A.T is a tax levied on goods and services; added on to the original value. All goods and services are eligible for V.A.T however food stuffs are exempt. Both customers and businesses have to pay V.A.T; businesses on the raw goods and customers on the final goods. Some companies are choosing not to pass the V.A.T increase onto their customers when it came into effect today; choosing, instead, to bear the extra cost themselves. For many companies, this will mean a decrease in profits however most businesses are prepared to accept this loss as the increased V.A.T on their goods will mean a decrease in shoppers.

The decision to raise the V.A.T has been widely contested, especially by the Labour Party who argue that it will "cost the average family £7.50 more a week." With the economy still unstable and jobs rare many families, especially those living on benefits, will struggle to meet this demand for extra money as their incomes will not reflect the hike. Many have also commented on the other effects the rise in V.A.T will have in the economy; retail sales will drop by "£2.2 bn a year," many small businesses will declare bankruptcy and thousands of jobs will be cut. Labour party members have been commenting that the rise in V.A.T will cause many families to suffer as they are forced to find "£7.50" extra a week. The Conservatives, however, have defended their decision to raise V.A.T by arguing that the "£13bn" raised annually as a result of the hike will pay off the U.K's huge deficiency and the record debts made as a result of Labour's time in parliament. The Conservatives have argued that the rise will help keep the economy stable and prevent a recession from re-occuring. With the economy only just recovering from the huge recession that shook the U.K only a year ago many are keen to make sure it doesn't happen again. The Conservatives have assured that the economy is much more unlikely to slip into a recession with this increase.

The majority of people are disappointed in the Conservatives choice to hike V.A.T but what are your opinions? Are you for or against the changes?