I think that the proposed cut in the VAT rate from 17.5% to 15% is a pointless exercise. Its not been clearly thought out and won't really help those at the lower end of the income scale anyway.
Will the high street really pass the VAT cut on????
Most high street retailers pick price points i.e. they pick prices that appeal to the public, at a price they think the public will be ready to pay i.e £9.99, £10, £15 etc etc - they don't think..... I'll sell this for £x plus VAT!
Do you really think that most retailers will sell a £9.99 product for £9.77 or a £25 product for £24.47 after the rate has been cut?
The answer is NO - most will stick to the price points that have already been identified as attractive to consumers.
If a retailer has identified that it can sell its product for £10 then they will keep the price at £10 and pocket the difference (23p). That might not seem like a lot for the average perosn - but actually it amounts to billions in the pockets of the businesses.
Retailers are more than capable of changing the total cost (inc VAT) as necessary i.e £5 off in order to have attractive price points.
Before you say that I'm being cynical - I thik that retailers have already shown that they are ready to exploit loopholes to keep as much money in their pockets as possible
http://images.vnunet.com/v6_static/oracle/pdf/fd/nov_vat_fdbrief.pdf
No I think the savvy retailer will simply pocket the difference in order to bump up its own profits!
The only way to truly test this is for someone to keep a track of all prices pre and post the cut - but no one is really goingto do this now are they!
Will it make a difference??????
The actuall impact in the retail price of a product will be just over 2%. When a retailer has a sale they would normally slash a minimum of 10%-25% of goods to get people through the doors. Just imagine how busy the January sales would be if the offer was 2% off everything???? Not very I would guess!
In these depressing times are you going to celebrate being to save 20p off a box of chocolates or £10 of a £500 plasma tv!!!
Why
Ultimately, I think it a sound bite - "look what we've done to help the public".
I guess you're going to ask what would I do - to be honest I don't know - but this is too little, poorly targeted and pointless!
What makes it worse to my mind is that none of the mainstream media (tv, newspapers) seemed to have picked up on this pointkess exercise!
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