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'Let us give cash back at tills instead of cutting VAT'
Joe Murphy, Political Editor25 Nov 2008
High Street firms face costs of £300 million to implement the temporary VAT cut, it was revealed today.
Stores will spend £176.5 million this year rushing in the cut to 15 per cent. Then they will have to spend another £127 million in 2010 when the rate reverts to its usual level of 17.5 per cent.
The bill for red tape and repricing was disclosed in an "impact assessment report" carried out for the Treasury and released last night.
A High Street rebellion was growing today, with senior retailers privately asking the Government to allow them to leave prices as they are and give people a discount at the tills, to save the expense of reprogramming tills and computer systems for 13 months.
One senior retailer told the Standard: "I don't think anybody will be able to afford to change their systems for the sake of a year-long cut in VAT. But we could make a simple adjustment at the till that would ensure the customer gets their discount and the Government gets its money."
The actual saving for a £1 item would be 2.13p, meaning that baskets of goods would have to be rounded up or down to the nearest penny, and separate calculations would be needed for goods that are levied at five per cent VAT.
Some retailers say they will leave prices as they are and use the VAT cut to fund promotion schemes to boost sales.
The Treasury assessment says business will need to spend £24.5 million this year on "familiarising" their staff with the change, plus £50 million on repricing, £27 million on extra accountancy checks and £70 million changing their systems.
A spokesman for the British Retail consortium said most firms would be able to absorb the costs without a problem: "Yes, it is a lot of money but retailers support the principle of what the Chancellor is trying to do and they will absorb the costs."
A Treasury spokesman said firms saw the cost as worthwhile. "Clearly the benefits to the economy and businesses of a £12.5 billion reduction in VAT massively outweigh the cost of implementing the change. This will be good for the economy but also good for the UK's 4.3 million businesses who, to the extent they pass on the reduction, will see increased sales."
Reader views (5)
Any mathematician can work out a factor to multiply the price of an item including 17.5% VAT to give the new price with 15% VAT, somewhere around x 0.9785.
- Robin, Brentford, UK, 26/11/2008 09:43
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Margaret Thatcher brought in "Care in the Community" but it seems they have all moved into the House of Commons now. Is there anyone in the country that couldn't foresee the problems this temporary tax change would cause, or who couldn't think of a dozen better ways of encouraging spending in the economy or who didn't know that the abolition of the 10p income tax would make the low paid worse off.
Nobody can seriously be this stupid but we've been waiting a long time for candid camera to jump out.
- Suzzy, UK, 25/11/2008 21:59
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A darling man! I'm going to have such a good Christmas. 2.5% of everything. Let's see, that's 12p off the Christmas pudding. 25p off the turkey. Another 25p off my whiskey. What? No reduction on whiskey? Anyway, my budget for Xmas presents is £50 so I'll save £1.25 there. Not bad, eh? Pity the mortgage has gone up by £80 a month. And that I've just been fired.
- John Problem, Hackney Wick, London, UK, 25/11/2008 18:50
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I think this clearly demonstrates how out of touch politicians are. Retailers have to go through all this hassle to temporarily change prices when everyone knows it's not going to have any effect getting people to spend more.
Most people are so laden with debt they don't have any credit to spend and £2 off an ipod is hardly going to get people stampeding to Curry's. Just cut spending and tax and let us decide how to spend OUR money.
- Chris Stenson, London, Uk, 25/11/2008 15:11
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This suggestion of giving cash back at the till rather than re-pricing items involves too much commonsense to be acceptable to Brown and Darling.
- Phil Jones, London UK, 25/11/2008 14:40
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