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Contractor accountants’ prices rise due to VAT increase

Contractor accountants’ prices rise due to VAT increase

Contractor accountants may be interested to learn that research from PwC suggests that last year’s VAT increase caused overall prices to increase by about 1%.

Consumers who were already struggling with rising food and energy prices saw a VAT rise from 17.5% to 20% at the beginning of 2011.

However, the chief economist at PwC, John Hawksworth, said the increase had a temporary effect and should not have an adverse impact on inflation or growth this year, providing there is no further increase in the rate of VAT.

He went on to point out that the VAT increase did have been some positive effects; at least as far as the UK economy goes. We now a smaller budget deficit and a lower long term interest rate.

Stephen Coleclough, a partner at PwC, explained that other countries in the European Union are following the UK’s lead and raising their VAT rates. France and Italy have both increased VAT, whilst the rate in Hungary has risen to 27%.

VAT increases are inflationary and intended to raise revenues. They also need to be set to meet the growth needs of individual nations, he added.

People in Ireland saw their VAT rate increase from 21% to 23% on the first of January this year. Originally the increase was to be implemented in two stages but it was decided to bring the rise forward to limit damage from the Euro crisis.

The Italian government raised VAT by 1% to 21% last September. A further 2% increase is expected in September this year, followed by a possible 0.5% rise at the start of 2014.

© 2012 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: 1996 UK Royal Mail Cartoon Stamp Card by andertoons

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