FSB calls for VAT cut

| July 18, 2011
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The Federation of Small Businesses (FSB) is urging the Government to cut the rate of VAT in core sectors of the economy.

The suggestion comes after the FSB’s latest Business Confidence Report, which saw a sharp fall in sentiment during the second quarter.

VAT was raised to 20% earlier this year to raise billions of pounds to trim the deficit but, according to the FSB, lowering the rate would boost economic growth and encourage consumers to spend – particularly in areas such as tourism.

The FSB is recommending that VAT be cut to 5% in the construction and tourism sectors.

“Consumer demand is a key barrier to economic growth so such a cut would encourage people to spend in these areas,” the Federation told the BBC.

Earlier this month, Ireland slashed its VAT rate on a number of goods, including restaurants, hospitality and tourism in a bid to boost the economy and get consumers spending again.

The country’s Government lowered the rate from 13.5% to 9% on 1 July and it will remain until December 2012.

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