There is a growing feeling among business owners in the UK that the rate of VAT should be lowered in order to stimulate the economy. VAT particularly affects the services industries who are struggling along with the rest of the sectors. In times of austerity the public usually cut spending in the services sector first.
Margaret Waters, general manager of the Park Plaza Hotel in Cardiff has said that lowering the VAT rate would encourage consumer spending giving a much needed boost to the hotel and restaurant trade.
She points out that Wales and the remainder of the UK are disadvantaged when competing with the rest of Europe. The rate of VAT means that a stay in a Paris hotel is nearly 15% cheaper than one in Wales, with the UK having the third highest VAT rate in Europe.
Leanne Eustace, director of Accounted For, an accounting firm located in Cardiff feels that the rise in VAT has made his larger clients less competitive when bidding for public contracts, as smaller companies and sole traders are not VAT registered resulting in lower bids from the smaller entities. He also points out that there are larger companies who should be registered for VAT but have failed to do so which disadvantages other businesses when trying to secure contracts.
However HMRC has launched a campaign designed to make VAT rule breakers obey the law, but until this issue is resolved, small businesses and sole traders not required to register, will continue to be less competitive and suffer accordingly.