Business leaders in the UK would overwhelmingly
prefer a VAT rise in next week’s emergency Budget than any other tax increase,
a report said today.
Sixty-one per cent of executives
quizzed for a survey by KPMG said an increase in VAT would be the best option
for their business, assuming that taxes are raised by Chancellor George Osborne
when he delivers the Budget next week.
Christine Hewson, head of tax for
KPMG in Manchester,
said a VAT increase from 17.5 per cent to 20 per cent in line with the European
average would bring in an extra £1bn a month for the Treasury.
She said that it would have little
impact on firms operating in a business-to-business environment.
But she added: “The big unknown,
however, is the potential risk that such a move could stifle consumer spending
and thus hamper the recovery, as it could cost the average household £425 a
“For those operating
in a more business-to-consumer markets, such as retail, financial services,
hospitality and consumer goods, it can be far more significant as increases in
VAT are either passed on to the consumer, putting up end prices, or absorbed by
the suppliers at the cost of squeezing their margins.”