VAT Increase.

[LostThePlot]

Hi All,

I just wanted to raise this point to see if I'm overly cumudenly about such things, or if it is a valid concern.

VAT goes up to 20% shortly, so for all those items that were say ?19.99, the news cost will be ?20.41 BUT and this is my concern, retailers will simply up the cost to a "rounder" figure of say ?20.50, or ?20.99. Or on say a ?499 TV, the new price of ?509.61 may become ?509.99.

Granted the pennies are minor, but it's the "Let's milk them dry" approach that this country seems to have is my concern.

Anyone else pondering this?

LTP

[SeanMacGabhann]

When VAT went down to 15% a few years back, businesses claimed it was costing them a fortune and consumers said it made little - no difference to them

But taking the same starting point of 17.5% and increasing by 2.5% seems to have everyone convinced they are being mugged

Swings and roundabouts

I?m sure many ?19.99 ticket items will stay at ?19.99 because it?s a more attractive pricepoint that either 20.41 or 20.50

Other items will be marked up beyond the VAT price

Swings and roundabouts

[JohnL]

In my experience lots of stuff will go up by 10% and it will be blamed on VAT

Very bad for inflation and increases the likelyhood of an interest rate rise.

[DJKillaQueen]

I think Sean is right on this...that some items will stay at the 9.99 level and the lost profit will be made up elswhere by increases above the VAT rise....so 19.99 might become say 24.99. It will all depend on what is being sold and what the existing margins are.

[Huguenot]

That's an interesting experience JohnL, where/when did you have it?

Retail pricing is based on maximising gross profit, which is in turn reliant upon an intricate relationship between margin and volume.

Whilst a VAT rise is likely to impact upon margin if the retail price is kept constant, it may be that an increase in the retail price damages the volume of sales more dramatically that the 2.1% drop in revenue.

The reason why the VAT reduction had little or no impact on retail price was because retailers knew it wouldn't affect volume - so they just maximised their margins.

For this reason there'll be a range of effects across the retail market, but probably very few significant ones, and you'll be guaranteed to remember only the isolated ones you didn't like.

Please remember that the vast majority of consumer necessities are zero rated, so as Crimewatch says, 'don't have nightmares'!!!

[louisiana]

SeanMacGabhann Wrote:

-------------------------------------------------------

> When VAT went down to 15% a few years back,

> businesses claimed it was costing them a fortune

> and consumers said it made little - no difference

> to them

>

> But taking the same starting point of 17.5% and

> increasing by 2.5% seems to have everyone

> convinced they are being mugged

By "2.5 percentage points". Not by 2.5%.

Do the math.

[SeanMacGabhann]

s

yes, well picked up

[Jeremy]

Huguenot Wrote:

-------------------------------------------------------

> Please remember that the vast majority of consumer

> necessities are zero rated, so as Crimewatch says,

> 'don't have nightmares'!!!

Yep - I was actually in favour of the VAT rise when it was discussed a couple of months ago, as seems to target people who regularly buy "luxury" products. Many seemed to disagree with me though.

[JohnL]

It's just a feeling relating to being in shops/pubs (no specific ones or areas) the day after a budget tax increase of say 1p and seeing 10p increases.

KPMG thinks we're in for increases due to various other reasons (fuel price, previous discounting).

http://www.guardian.co.uk/business/2010/dec/14/retail-inflation-vat-price-rises

I've a gut feeling people will continue to spend for a while too - meaning other retailers will follow those imposing higher prices.

[dbboy]

VAT will rise by 2.5% fron 17.5% to 20%, i.e. ?2.50 extra for every ?100 spent.

[Coman]

If the shops have to go to the trouble of altering their prices, they would probably use it as an opportunity to put the price up in real terms. Inflation is pretty sure to follow.

[indiepanda]

Inflation only follows if consumers continue to spend. As someone has already pointed out it's more luxuries than essentials (with the exception of tampons) that are subject to VAT - if prices go up more than we think is acceptable we always have the choice of not buying.

[louisiana]

Jeremy Wrote:

-------------------------------------------------------

> Huguenot Wrote:

> --------------------------------------------------

> -----

> > Please remember that the vast majority of

> consumer

> > necessities are zero rated, so as Crimewatch

> says,

> > 'don't have nightmares'!!!

>

> Yep - I was actually in favour of the VAT rise

> when it was discussed a couple of months ago, as

> seems to target people who regularly buy "luxury"

> products. Many seemed to disagree with me though.

Is a carpet a 'luxury product'? I need to replace some 30-yr old ones now cut to shreds after lifting floorboards repeatedly (and over which a wayward tenant has managed to throw several pots of paint, just to make them pretty, like).

I can't think of the last 'luxury' I spent good money on (kitchen pans? blanket? stove? slippers? thermal underwear for this fri**in winter?) Most VAT is on very ordinary, day-to-day items.

[????]

The depreciation of Sterling and the rise in commodity and fuel prices are what we have to worry about for inflation 2.5 on VAT will have a minimal-effect on this.

[Chick]

Such as fish and chips??

Jeremy Wrote:

-------------------------------------------------------

> Huguenot Wrote:

> --------------------------------------------------

> -----

> > Please remember that the vast majority of

> consumer

> > necessities are zero rated, so as Crimewatch

> says,

> > 'don't have nightmares'!!!

>

> Yep - I was actually in favour of the VAT rise

> when it was discussed a couple of months ago, as

> seems to target people who regularly buy "luxury"

> products. Many seemed to disagree with me though.

[Huguenot]

"The depreciation of Sterling and the rise in commodity and fuel prices are what we have to worry about for inflation 2.5 on VAT will have a minimal-effect on this."

Correctamundo - didn't want to say it because it would have confused the issue.

However, it does make UK exports cheaper, which keeps people in jobs, which... etc.

[Coman]

Chick Wrote:

-------------------------------------------------------

> Such as fish and chips??

>

Just briefly, hot takeaway food is standard rated and so VAT on this will go up on 4 Jan. Cold take-away food and drink is zero-rated, provided it is not standard-rated food, such as confectionery or bottled water.

Ask for your chips cold.

[sedgewick]

It won't be a problem for the pro's of ED but for somebody like me on 16K its going to hurt a bit because everything is becoming so much more expensive. Heating and food are going through the roof so I think the gready vat rise by the government is a further attack on the poor. As for the govt saying we're all going to have to suffer is easy to say when you're already a rich politician and the impact of such a rise will be minimal.

[Loz]

dbboy Wrote:

-------------------------------------------------------

> VAT will rise by 2.5% fron 17.5% to 20%, i.e.

> ?2.50 extra for every ?100 spent.

As others have sort of pointed out, after VAT it's about ?2.13 for every ?100 spent.

[Huguenot]

Food (apart from luxury foods) is zero rated, and the discounted rate on heating I though was unaffected by the VAT rise this time around?

Hence changes in prices are nothing to do with government and couldn't be considered an 'attack on the poor'.

Imported foods are affected by exchange rates in addition to global commodity prices. Exchange rates are a complicated mix of many factors including government control over import and export objectives and investor confidence.

Hence neither of those could be considered an attack on the poor either.

If you're worried about either of these elements then try and focus on buying locally sourced seasonal vegantables.

That's not an attack on the poor either - it just makes sense ecologically.

Here in Singapore I only eat Sprouts once a year as they're 50p each. That's not racism or an attack on me for not being rich enough, it's because they only grow in tempreatures of less than 22 degrees and that's an expensive habit in a tropical climate.

[Jeremy]

Yes, of course takeaways are a luxury product! If I was struggling for cash, there's no way I'd spend ?5 on a fish & chip dinner.

Of course poorer people will be hit too, everybody has to pay VAT on something now and again. But as a general rule, richer people spend a greater percentage of their income on VAT-eligible products.

[JohnL]

Girl at Starbucks seemed a bit confused over whether VAT went on or not - think they might have changed their mind.

They have 2.50 for a Latte on the board, I was charged 2.45

[ratty]

Of course it's an attack on the poor! Whoever thinks it is not is deluded. People already down to their last penny each week cannot afford to pay more, or us the implication that the poor gave no right to buy "luxury items?"

[Huguenot]

No ratty, I can't accept that kind of polemic.

For an attack there needs to be an attacker and hostile intent. I can see neither in this situation.

The point about poor buying luxuries is a timeless political one. It's an argument that has more to do with Marxian abilities and needs than about the current situation. We currently live in a capitalist society where individuals are rewarded according to the ability to generate wealth surely?

If you feel the government is the attacker with hostile intent against the poor then really it's just another example of class war propoganda.

The poor are certainly victims of circumstance, but it doesn't make it an attack.

['bout now]

Here in Singapore I only eat Sprouts once a year as they're 50p each. That's not racism or an attack on me for not being rich enough, it's because they only grow in tempreatures of less than 22 degrees and that's an expensive habit in a tropical climate.

Sprouts a luxury, who'd a thunk it.