The 2.5 per cent reduction in VAT comes into force today but there is debate over how many retailers will pass on the savings and whether it will help boost the economy.
Music and DVD retailer HMV confirmed it will be passing on the VAT reduction in full to its customers from Monday.
A spokesperson said: “Although we are passing on the VAT reduction at the point of sale, the re-stickering of our entire stock would represent an enormous undertaking for our sales staff at this very busy time of year, so the prices shown on our product packaging will, for the time being, remain unchanged.
“There is no VAT on books in the UK, and so pricing on books in Waterstone’s remains unchanged.”
Boots has also confirmed it will be passing on the tax cut, although admitted it would be a “technically complex” issue to change all the prices throughout its 2,600 stores.
However, not all stores will pass on the discount, analysts warn.
“Re-ticketing items is an expensive and complex exercise and with retailers wanting to maintain pricing practices such as price points ending in 99p or whole pounds, not all prices will change,” said Nick Gladding, lead analyst from Verdict Research.
“The prices of the cheapest goods are least likely to be revised, with retailers making bigger adjustments to lines where they hope to secure competitive advantage.
“The picture is further complicated by the high level of discounting already being deployed – with consumers not responding to the VAT-related reductions as much as they would if they occurred outside the Christmas and New Year season,” Mr Gladding added.
The British Retail Consortium has also advised consumers that some prices are likely to go up – the falling value of the pound means imported products will become more expensive.
Accountants KMPG estimates a 2.5 per cent VAT rate cut is the equivalent of a 21p reduction in every £10 of standard rated VAT inclusive expenditure. Deloitte meanwhile estimates an average £50 shopping basket – with goods with and without VAT - will be 53p lighter now.
The BRC estimates the 2.5 per cent VAT cut will result in a reduction in prices of around 2.1 per cent, due to the way VAT is calculated.
9 Comments
“Accountants KMPG estimates a 2.5 per cent VAT rate cut is the equivalent of a 21p reduction in every £10 of standard rated VAT inclusive expenditure”
How can you estimate that? It’s cold, hard mathematics, no estimation required!
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does this include petrol aswell, theres VAT on that, also your phone line rental, mobile phone services, cable/sat TV, look at your bill theres a VAT section at the bottom.
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taken individually it is peanuts, but in 12 months it will mount up to several hundred pounds especially if you bought a new or second hand car
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Jake: you obviously did ‘old math’ at school.
1. Teaching old Maths
VAT is reduced from 17.5 to 15%.
What is the equivalent in every £10 of standard rated VAT inclusive expenditure?
3. Teaching new Maths
VAT is reduced from 17.5 to 15%.
What is the percentage decrease in the VAT rate?
3. Teaching Maths In 2008
VAT is reduced from 17.5 to 15%.
How do you feel about that? Discuss with your class and write down your opinion.
There is no reason to do any calculations as the experts will provide the answer for you.
(Extra support can be given if you feel this is a culturally biased question. Counselling will be provided if you feel traumatised by any aspect of this question. You can give the answer verbally for health and safety reasons if you feel there is a risk you could strain your hand writing the answer out.)
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This is a the latest of a long line of complete cons by this government. The cut in VAT is already offeset by a 2p per litre increase in fuel duty and another one on the way in April. All goods have to be delivered so this adds to supplier’s costs. The cut in VAT is temporary, but the increase in fuel duty will be permanent. Personally, I’m sick of being ripped off by politician’s scams. Lets have a general election now. Nobody vote and we can throw all 600 MP’s out on their ears!
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Arriva trains are not passing on the VAT cut.
Still charged £6.30 Wem to Crewe, when asked about the VAT cut the guard denied any knowledge of it and said he had to charge the price on the machine.
Clearly the VAT reduction is going straight to some suppliers not the customers.
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rediculous, more hastle than its worth!!
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There’s a rich seam of business that should not really exist in a political system where the consumer had enough information to make fair judgement and choice of vendor.
However, like the ‘dole dossers’ they know the system and should really be treated with the contempt that ordinary folk (who play the system) are.
Quite frankly what the hell do these companies want - they’ve had it so good through the Blair era and now go on TV and in newspapers and whine about how a 2.5% VAT cut is somehow bad for them? Don’t they invest ahead to get a return, we’ll sitting and changinge your till VAT setting is that investment - it’s not much, I know, but like the asymmetric fuel prices (a lot up then a little down) the public is used to that treament.
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way to go - cutting VAT in an effort to stimulate the economy by marginally cheaper prices and then realising that actually the consumer isn’t getting a cheaper price because the 2.5% is being retained by corporate business to enhance their profitability…once again the consumer is stiffed.
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