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BCC demands increase in VAT not national insurance

The British Chamber of Commerce (BCC) has today pleaded with the UK government to increase VAT to 18.5% instead of increasing the rate of national insurance contributions. Figures from the BCC suggest that the scrapping of next year's national insurance contribution increase would benefit businesses by £5.1 billion while an increase of just 1% in the rate of VAT would bring in around £4.5 billion.

The truth is that the government has been looking at ways of increasing investment into the economy to allow businesses to flourish and pull away from economic downturn. Therefore it would make sense to spread this particular fundraising activity across the board with an increase of 1% in VAT which would effectively be channelled straight into the pockets of the UK government. While this would obviously reduce the real spending power of disposable income for UK consumers it would allow businesses to at least consolidate in the short to medium term.

There are many different ways in which the UK government can and will increase income although there is concern that taxes basically targeted at the business sector could be counter-productive in the short to medium term. Can the UK government afford to penalise businesses at the expense of consumers in 2010?

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