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Most online retailers to absorb VAT rise

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Only a quarter of online small to medium-sized enterprises (SMEs) intend to pass on the full cost of next month’s VAT rise to consumers, a new study has found.

Internet giant eBay has today produced a report that suggests 24 per cent of SMEs will absorb the full cost of the government’s VAT hike, whilst 39 per cent will avoid passing on the whole cost to their customers.

Despite average sales being 20 per cent up on last year for UK-based SMEs, most will be wary of scaring off customers with large price hikes at a fragile time for the consumer.

Jody Ford, eBay UK’s Director of SME Businesses, said: “Our latest figures reveal that online businesses are continuing to thrive.

“However, the VAT rise is set to hit at the busiest time of year for our businesses, with January on average ten per cent busier for online firms that a typical month.”

More than 60 per cent of SMEs surveyed by eBay harbour fears that the VAT rise will depress consumer spending, whilst around half think that it will harm their revenues next year.

Although the affect on consumers will be felt on expensive big ticket items, the affect on SMEs and online business will be to significantly increase their VAT bill overnight.

Ford added: “Every business owner, including the 160,000 who make their living on our site, face a difficult dilemma over whether to pass on the imminent VAT rise to their customers.

“The fact that more than 60 per cent of businesses intend to absorb all or part of the VAT hike reveals the real concerns they have about its impact on consumer confidence.”

Published on Wednesday 29 December by Editorial Assistant

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