Federation of Small Businesses says increase VAT threshold

“Additional jobs, more than 30,000, would be created if the starting point for small businesses paying VAT were increased”, reported the Federation of Small Businesses. Raising the VAT minimum requirement from £70,000 to £90,000 would minimize the VAT bureaucracy, save over £160 million each year, but also reduce VAT payments by £710 million.

From this money over 30,000 jobs could be created. The jobs revenue and the surplus of over £12 billion, from the new 20% VAT, as of January 4, 2011, will compensate for the change in Treasury VAT money.

Coventry chair, Bruce Undy, of the FSB, said that they were requesting the threshold be increased to spare the small businesses, which would be required to pay exorbitant VAT fees. He went on to point out that the government’s commitment to recovery arising from the private sector should make room for small businesses to flourish.

Reinvesting the money saved by small firm from the VAT increase, or hiring new staff, will improve small business growth, according to the Small Business Programme for Growth. Cuts in government spending, as noted in the Comprehensive Spending Review, will go toward recovery, hand in hand with this programme.

The 2.5% hike in VAT will damage the small business and cause the economy to suffer further. Small firms cannot handle the burden of such increases. Consequently, manage will close, placing a further strain on unemployment and a reduction in VAT revenues.

If a business survives it will have to reduce its inventory or pass on the cost to the client. The private sector then will cease to be the tool for recovery and become the albatross around the government’s neck. The latest estimates from the FSB indicate the more than 10% of all firms anticipate reducing their employment in the last quarter.