VAT reduction from 17.5% to 15%

Hi Folks,

Its bugging me that some shops do not pass on the VAT reduction, which is in my understanding illegal, as the VAT does not belong to the shop.

In example you’ve paid 100£ for something in a shop before, which included 17.50GBP VAT, if I now pay still 100£ then they have made a hidden price increase from 82.50 GBP to 85 GBP, which is really raising my blood pressure. :sick:

I have asked in one shop why they do not pass on the VAT reduction and the answer I received was that their prices are already so special that they decided to not pass on the VAT reduction.

Its always easy for people to ask the government to lower i.e. the VAT, but if businesses do not pass this on correctly then I am financing the tax reduction as a taxpayer, but still paying the same price at the shop. Which means that me and myself as a taxpayer have been screwed.

However in general I think that it was a very positive move, showing the governments capability to make quick decisions if required.

their just trying to correct their own mistakes so dont see it as a favour because things are bad. ITS Mr G. BROWN’S FAULT

As for ‘the our prices are already cheaper’ RUBBISH. Ask them to prove it :wink:

They do have to pass on the reduction … eventually.Retailers do have a period of grace while they reconfigure their internal systems and POS pricing.I work for a software company, and we were madly producing patches for all the major releases of our software and then having to send them out in two days.I expect the person in the shop was just ignorant and made something up on the spot.
Personally, I’m not convinced the VAT change is going to make a blind bit of difference - you’ll save £2.13 on a £100 spend, which is hardly going to make you rush out to the shops, is it ?

They must be taking lessons from some of the banks:)

Personally I think that VAT should be scrapped. Think of the paperwork that would be eliminated, and that VAT fraud that occurs would simply cease, things would become cheaper. The worse off in society would be better off, allowing for a cut in benefits.

Just a thought.

Such a small fall drop in VAT will hardly jump start consumer spending. All it will achieve is a reduce of revenue into public coffers, so we will end paying it back as some other form of taxation at a later date. A very hamfisted way of trying to cure the economy.

Interesting view.

Personally, I believe we should scrap income tax and raise VAT to a much higher level to compensate. That way, we are taxed on what we spend, not what we earn. Saving would be encouraged, leading to a more stable, less consumer credit driven economy.

Tourists to the UK would suffer as our prices would be sky-high, but who cares?! Our earnings would go much further when travelling abroad as we wouldn’t have paid tax before taking it on holiday. Businesses wouldn’t suffer because they reclaim VAT spend anyway, and exports don’t suffer because there’s no VAT impact on foriegn business.

Do I get your vote when I stand next election? Oh - and bikes in bus lanes, no bike tax, no exhaust volume laws, speeding tickets don’t apply to bikes etc. etc. etc.

It is a bit more complicated than comparing £82.50 and £85.00.To work out the vat on £100 and reduce it from 17.5% to 15% you have to do =

£100 / 117.5 * 115 = £97.87

I can see why they don’t bother!

There is no obligation for any retailer to pass on the VAT drop on their retail price.
They can, if they wish to do so keep the retail price (inc VAT) just where it was and just bump up there margins…
There is nothing illegal in that neither it is immoral.
If company carry on reducing margin as well as there turn over as the economy slow down, they will soon be out of business and workers out of work…
How would you like that?

I’m not wrong, you just looked at it differently.
Yes, they can leave the retail price as it is, but the VAT element of the price must change to 15%.
They are passing on the VAT reduction, but also increasing the retail price - blatant profiteering - they are certainly not reducing margin as it’s only the tax element that has decreased.
Retailers that employ this practice should be outed and shunned.

It’s a total joke and will damage the economy as a whole. There are alot of hidden costs in changing prices. In my industry we are entirely virtual with web pricing but it’s still a nightmare. All pricing that had been memorised is now wrong!

I don’t blame companies not passing on the difference if it means them labelling large amounts of stock. They could apply the discount at the tills but in reality, people buy items off the sticker price, not with a 2% discount in mind. It doesn’t make business sense to change for many companies.

I’m all for reducing the tax burden for individuals, much prefer a windfall tax on the bloody Oil companies who make billions a year from a natural resource that’ll eventually be gone.

One thing though on the VAT reduction, they couldn’t reduce any further than 15% because of EU regulation, though I’m sure many will take issue with that itself.

For me I’m absolutely buggered by the crap Euro rate at the moment, no doubt Govt wants it there to help our export business, but it also really hits the people (retired) who have sterling income (pension) but live abroad. Not sure if that’s just a bonus for toady Brown.

And while I’m at it how come we’re taxed when we earn and taxed again when we invest that and get some (measly) interest. Also why’s everyone so keen on base rate reductions, it means anyone with savings get’s naff all return. Works so well when Banks don’t follow suit and leave mortgage rates high but reduce the savers interest, they win both ends.

Should be more legislation and regulatory control so that this, like the Oil price reductions are passed through to consumers.

Rant over - for the moment!

You’ve got my vote :smiley:

Interesting debate! I think that’s what they do in Iceland (very low income tax, very high spending tax), but it’s clearly not done them any good.

That is exactly my point!

So you as a taxpayer have to pay for shops increasing their profit without them facing questions from end customers, as they have not made a nominal change to the displayed/charged retail price.

…and this smells like a dead Rat to me!

well IF the shops have increased their profit, then their staff will be more likely to remain in employment, if they pass on the saving (at a cost to themselves, IT updates aren’t free you know) and have to let staff go as a result would you be so happy to have saved money? I fail to see where people get off with these hysterical accusations of profiteering, shops exist to make profit, they are all feeling the chill now and I don’t see this goverment pulling our chestnuts out of the fire! if you think you are being screwed now just wait untill the bill for the goverments policy hits home !

Got my vote :smiley:

that’s two

Software companies would have supplied a patch for the VAT rate for free…

There is no obligation on retailers to pass on the VAT reductions and why should they? A lot are operating on pretty slim profit margines and a bit (trivial) boost might stop the loss of a a lot of small retailers.

As an indirect tax, it’s pretty evil anyway.

The fat cat banker pays the same as the poor jerk trying to support a family on a tenth of that wunch of bankers for his gas, electricity, clothes.

I’d like to see VAT abolished and all put back on income tax, but I’m that unfashionable thing, a socialist.*

No that’s not the same thing as supporting New Labour. Very far from it!

OK… I think there are a few crossed lines here…
VAT charged on items must be reduced - it’s the law.
Whether retailers actually drop their prices is another thing - but then if we don’t like the price, we can always walk away and buy elsewhere.Retailer should have little in the way of cost overheads to introduce the VAT reduction - just put up a sign saying that although item pricing remains the same, the reduction will be applied at POS.
Software companies, however, have had to take a hit - it cost a fair amount for us to send out patches to make sure the VAT rates would be consistent across customers’ systems (yes you can vary the VAT rate in the financials module, but it all gets a bit tricky when calculating credit notes and defingin tax points).
I’m with the socialist fellow above - VAT is a horrible regressive tax that hammers the poor and makes little difference to the affluent.I would also be in favour of an increase in income tax to replace it.