VAT Reduction – Complete waste of time?

Uncategorised By Feb 07, 2009

I wonder if I’m missing something fundamental. The reduction of VAT to 15% from 17.5% in the UK for a year seems like a really dumb thing to do.

Looking at quite a few products advertised and they still are ‘optically priced’.  They are still priced at, for example, 99.90 often the same price that they were with the higher VAT.

The 2% ish reduction isn’t enough to bring prices down to the next optical price so what has happened?  Some retailers still price in store at the ‘old’ price and take the hit at the till.  Good for them – I guess the loss of sales for not being quite as obviously competitive is cheaper than the cost of the many thousands of new price signs that they would need to print.  Too many retailers have just increased margins to compensate.

My ISP sent me new invoices and credit notes for pretty much every domain name and I owned last year changing the ongoing rate to 15% VAT.  It’s far too complicated: it’ll cost me far more in time to sort it out that the 2% difference that doesn’t affect me anyway as my business is VAT registered.

Overall personally it’s not going to save me enough money to outweigh the extra hassle and time I am wasting for my business.  Even if I wasn’t involved in my own business, would I really notice a reduction in my cost of living? I doubt it.

It is supposed to help stimulate demand, but how can a 2% reduction make a significant difference?

Finally if you don’t believe me have a look around the CD or DVD prices on Amazon UK and see if you can spot a lower price.  I reckon the real winners in this have been retailers – now making a couple of points more margin now.

This will probably be the only time I say this but on this but on the subject of UK VAT, I agree with Nicolas Sarkosy.

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