Optimism over VAT rise

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ONLY time will tell how much of an impact this week’s VAT increase will have on businesses in Kirkcaldy.

That is the view of some of the town’s business bosses.

Alan Russell, chief executive of Fife Chamber of Commerce, said: “Nobody likes to increase tax of any kind but from a business perspective, it is the lesser of the evils which could be imposed.

“The increase will have an impact on some spending patterns but I would argue that for the general public, it wasn’t hugely noticeable when it reduced and then when it went back up, so hopefully it won’t make a huge impact on day to day life.

“Other than for major purchases, I hope it is not going to have a significant impact.

“The increase might cause problems for certain retailers, for example car sales garages and those who sell high cost goods but only time will tell.”

Kirkcaldy’s town centre manager Sunil Varu believes the impact on shoppers will depend on how retailers deal with it, whether they absorb the extra cost of pass it on.

He added: “We are coming to a quieter period of spending anyway.

“It is going to be interesting to see how the major stores deal with the increase.

“The smaller businesses have a better relationship with their customers and they will have to come up with ways to deal with the increase.

“Major increases will be seen on expensive goods but a lot of people made their major purchases before the tax increase.”

More than 70 per cent of small businesses expect the VAT rise to have a negative impact on their business, according to a member survey by Federation of Small Businesses (FSB) in Scotland.

Just under three-quarters (71 per cent) of the 1600 respondents expect the rise to be unbeneficial to their business.

A further 52 per cent expect to increase prices, 45 per cent expect a fall in turnover, and 36 per cent expect a loss of customers as a result.

The FSB has been calling on the Government to help alleviate the stresses and strains on hard hit firms’ cash-flow by increasing the threshold at which they begin to pay VAT, from the current rate of £70,000 to £90,000.

This has the potential to create up to 35,000 jobs and help small businesses when they need it most.