Shops not passing on VAT cut

Wicksta said:
The thing is it may be in our pocket now, but think of that money attached to a piece of string and covered in glue to take more money out of your pocket in the future. It's a loan pure and simple.

I can quite understand why retailers such as yourself would defend the drop though, you don't have a shop floor as such to worry about and it makes for some great publicity with very little outlay. You only had to look at the replies in the "VAT drop coming early" thread to see how easily people are suckered in for such a small reduction. On a normal day a 73p drop in RAM previously costing £29.99 people wouldn't even have batted an eyelid.
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Yes the government is paying for the tax cut with borrowing. But if this boost to the economy has the desired effect it will reduce the amount we have to pay out in unemployment benefits and lose from reduced income tax revenue, which could more than make up for it. As Over Clocker said, you need to look at the big picture.
 
The bigger picture is that the sheer cost of implementing these VAT reductions is simply huge. I have just redone a whole campaign in store for a client who has 260 outlets and the sheer logistics of doing this on a whim in my industry is staggering. For those who think that this 2.5% will put more money in our pockets is wrong, as many businesses(retailers mostly) will have to make that price point change cost back elsewhere...

I agree 2.5% reduction is nice, but still it doesn't affect me in the slightest as I am currently saving and waiting to buy. I already have all the big purchases that a VAT drop would be nice on. A drop in fuel duty would help people immeasurably for example or the price of the following two items which annoyed me recently:

A.) Salad cream (450g top down) £2.40
B.) Chips at rugby match £2.50 (used to be 1.10)

That is why we are in a recession! :)
 
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Spie said:
A cut in tax is a cut in tax. It's better in your pocket than the Government's.
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I think that's the point. If business chooses not to pass it on, then it's better in businesses' hands than the government's. If businesses do choose to pass it on, it's better in consumers' hands than the government's. Either way, the economy wins. :)
 
I find this thread funny in a tragic sort of way. To everyone saying this is too small a cut to make any difference can you say what you're expecting? Small changes is all any country can afford to do and hope it nudges the economic supertanker in the right direction. It's very difficult for it to make sharp turns (though the current downturn is as close to a sharp turn as you'll see). The idea of the VAT cut is to make people spend a little bit more in the shops. The shops then buy a little more stock from the supplier, who in turn buys a little more from the manufacturer. The manufacturer then has more orders on the book, so its workforce is safe. Those people are then paying taxes instead of claiming dole. They are then going into the shops and buying goods that they couldn't do if they were made redundant.

If shops simply didn't pass on the reduction, the filtering down would just stop with them. They'd have more cash, but nothing would go down the chain. It seems an easy enough concept to understand but most people don't seem to comprehend.

Remember this is all tied in with efforts to cut the cost of borrowing and to keep banks lending money. Many small things adding up to push us towards recovery. This is a plan put together by experienced economists who have many years in the field. To read people flocking to a student's sneering and misinformed dismissals of it is strangely disheartening.
 
Burnsy2023 said:
That would be quite difficult, especially in a supermarket, as you can't take off 2.5% of the total amount as not everything in a supermarket is VAT eligable.
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And that would be wrong amount to deduct anyway.

Howeve if you take as the poster suggested the VAT to 15% then you will effect only the items that are subject to VAT exactly how they were when VAT was 17.5%
 
our economy is in ruin as we can't afford to create millions of needless jobs in the public sector to offset the consistant loss of industry jobs in the last 20 years. We can't afford to pay these people and much of our borrowing and debt as a country is being incured to pay people to do jobs we don't need them to do, to stop us having 6million unemployed people in this country, instead we stick them on alternative benefits so they aren't classed as unemployed or give them a fake job, title and paycheck. Increasing borrowing to pay for these jobs as we cut taxes does nothing but put us in a worse situation.

In this very specific case the money is most definately much better off in the governments hand paying these people rather than borrowing more every day to pay these people. The more debt we get into the more trouble we get into, borrowing is not the way out.

yet again i'll say, encouraging business to come back here is the way forward, tax cuts should be extended to industry to persuade them to build factories and create jobs here.

AMD foundry today got their 1.2BILLION, yes BILLION tax incentives to build their fab in new york state. This is a 5billion pound plant that will create thousands of jobs in the long term and many more thousands in the short term producing housing and services in the local area to support the long term staff. so let them off 1.2billion, to bring in 5billion into the economy, overall a massive net gain of money into the area/country, continued job growth of which all of them will pay taxes, buy houses, buy food, go out to bars and restaurants stimulating economic growth.

Why is the dollar not devaluing as badly anymore? as they still have some industry left in their country, while we really just don't anymore.
 
Burnsy2023 said:
That would be quite difficult, especially in a supermarket, as you can't take off 2.5% of the total amount as not everything in a supermarket is VAT eligable.
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are you serious? it would be easy as pie, your food bill already has the tax amount calculated by putting 17.5% tax on the correct items that qualify for it, you simply take 2.5% off that tax amount, incredibly easy, everything is already done.
 
Jonnycoupe said:
And that would be wrong amount to deduct anyway.
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Whatever, my point stands.

Jonnycoupe said:
Howeve if you take as the poster suggested the VAT to 15% then you will effect only the items that are subject to VAT exactly how they were when VAT was 17.5%
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Don't get me wrong, supermarkets should find this trvial, but the potential for business distruption and smaller businesses having issues lowering prices shouldn't be underestimated.

That's not to say I agree with it though.
 
[TW]Fox;13007972 said:
I agree, Mr Brown never makes errors of judgement. Like selling our Gold Reserves at the wrong point.
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yes and no, its essentially a stupid thing to do, in hindsight. But if a loanshark comes calling, you owe the money then, you don't say, well the value of the TV will be increased in 3 years, can you come back then please?

What if the value of gold was worse now than when he did it, we'd be in far more trouble now than we are. Had he not sold then, would we have slipped into this recession earlier? Sometimes things aren't really a choice and you can't always wait for the best time.

I do believe Brown is terrible, a complete moron and shouldn't be in charge, but the easy blame game on the gold selling isn't exactly as straight forward as it seems and people make out.
 
You made a point of it being 'especially difficult' for supermarkets. I was just raising the point that really its not.

They are changing their prices all the time anyway so just need a flush through the whole store with the new price tabs, few products carry their prices on the packaging.

I cant reelly see the big issue with this 'extra cost', stimulus within the graphic printing industry maybe, but I imagine the main cost is just counting peoples salarys who would be employed by the companies anyway, regardless if they are doing something uselful or not.
 
mulpsmebeauty said:
I find this thread funny in a tragic sort of way. To everyone saying this is too small a cut to make any difference can you say what you're expecting? Small changes is all any country can afford to do and hope it nudges the economic supertanker in the right direction. It's very difficult for it to make sharp turns (though the current downturn is as close to a sharp turn as you'll see). The idea of the VAT cut is to make people spend a little bit more in the shops. The shops then buy a little more stock from the supplier, who in turn buys a little more from the manufacturer. The manufacturer then has more orders on the book, so its workforce is safe. Those people are then paying taxes instead of claiming dole. They are then going into the shops and buying goods that they couldn't do if they were made redundant.

If shops simply didn't pass on the reduction, the filtering down would just stop with them. They'd have more cash, but nothing would go down the chain. It seems an easy enough concept to understand but most people don't seem to comprehend.

Remember this is all tied in with efforts to cut the cost of borrowing and to keep banks lending money. Many small things adding up to push us towards recovery. This is a plan put together by experienced economists who have many years in the field. To read people flocking to a student's sneering and misinformed dismissals of it is strangely disheartening.
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I'm glad some people get it :)
 
Spie said:
I bet if VAT went up 2.5% most of those saying this cut makes no difference would soon change their tune.

A cut in tax is a cut in tax. It's better in your pocket than the Government's.
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but its "our money" anyway, the govenment didnt magically balance the sheets with only 15% VAT.

Tax's will rise next year to recover the VAT losses, Duty has ALREADY gone up. We are ALL going to end up at a net loss in this (you more so because you earn a hell of a lot more than me! lol)
 
dirtydog said:
I'm glad some people get it :)
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I don’t really think that many of the people who have posted on this thread don’t already “get it”. The person you quoted has more or less just explained what the aim of the vat cut is. What people are questioning is whether it will actually have that effect. To be fair at least he managed to do it without mindlessly attacking anyone.

What is being questioned is, given the amount of debt that it is going to cause the country, was this the most effective method to stimulate spending in the economy? What Fox has argued, and argued well, is that it will not. That’s fine, it’s a different opinion to yours but it is perfectly valid.

I have only studied economics to degree level so I am in no position to question the might of Gordon Brown but when small businesses, industry, opposition parties and many many of the general public are questioning the sanity of the move then it is time to ask questions. On Question Time last week the panel, including the Chief Executive of Sainsburys who has no political axe to grind all suggested that there were more effective methods of stimulating spending that a cut on vat. It was also suggested that it was a hurried move and that if it was for the good of the country rather than politically motivated why not get everyone round a table, including representatives from the large players in UK retail and see if there were any other roads to go down first.

While this vat may have a small effect on spending now it also means that we will be taking the tax hit and the vat increase just at the time when we are supposed to be emerging from the recession. Surely that’s a bad idea?
 
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