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A brief observation on a prospective cut in the VAT rate

Brown and his glove puppet at No 11 cannot cut VAT to below 15% because of EU law, so let us say that they go all the way from 17.5% to 15% on Monday. What is likely to happen?

In the case of products with established price points, let's say DVDs, CDs etc and any number of things that end in .99 pence, is it realistic to think that a grand total of tuppence per pound is going to be knocked off either at the till or on price stickers?

Further, I would suggest that for people with discretionary income, if tuppence or thruppence per pound *is* knocked off, it is only for high value items that a theoretical 2.5% price cut becomes a saving that might serve as a substantial incentive to buy. After all, one would have to be dealing with purchases of more than one hundred pounds in order to save the price of a pint. Up the ante to a thousand pounds, and the saving would cover a fairly cheap indian takeaway for two.

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Anonymous Geoff said... 4:17 pm

A very good point. Also, because we don't have the authority any longer, this will bring the point home to a few more people that we can't freely decide some of our own levels (or indeed types) of taxation any more.

UKIP will milk this angle if they have any sense. It may have unforeseen knock-on electoral effects.  



Blogger James Higham said... 4:21 pm

Can't really knock a cheap Indian though, Mr. C.  



Blogger Bill Quango MP said... 4:52 pm

Quite. The saving is on the invoice that the business receives from its suppliers. This won't be passed on except in the normal run of price cuts and sales promotions that are going to be run anyway.  



Blogger Croydonian said... 5:01 pm

Crikey, anyone would think you had all been waiting patiently for me to post something.

Geoff - too true. However, I do not rate UKIP's tactical suss.

James - To adapt a joke, it's tough to pay 30 quid for an Indian takeaway, but when it's 20 it's tougher.

Bill - Yup, so it looks good on paper, but does little for the average shopper.  



Blogger CityUnslicker said... 8:26 pm

we always await with metaphorical pens aready.  



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