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VAT nightmare as retailers struggle with cut
Retailers have reacted angrily to the VAT cut announced by Chancellor Alistair Darling on Monday, saying it will make little difference to sales and cause huge disruption at the most important time of year.
According to a survey of 40 mid-market retailers conducted on Tuesday by BDO Stoy Hayward, 80 per cent felt that the 2.5 percentage point VAT rate cut would make no difference to sales. 90 per cent said implementing the change would be “very difficult and costly”.
While the change was designed to stimulate retail spending, many retailers feel the cut is too small to make a difference.
“In quantity terms, it is not a lot when you consider what is happening with the devaluation of the pound and cost-price inflation,” said Peacocks chief executive Richard Kirk.
House of Fraser chairman Don McCarthy said: “I can’t imagine that it will make a significant difference to the economy. It will just put pressure on retailers in the run-up to Christmas. You can get 20 per cent discounts on the high street. What’s 2.5 per cent?”
Retailers were also concerned about the complexity of getting systems and prices changed by Monday’s deadline. The diverse VAT levels levied across different categories make the task even more difficult. Children’s clothing and most groceries, for instance, are already VAT-exempt.
McCarthy said: “It would be totally and utterly impossible to change prices within 14 days. We couldn’t do it in time.”
Argos owner Home Retail Group also cited concerns over timing. The retailer said: “This is a complex issue to manage properly at short notice. While we will do everything we can to ensure that changes are implemented within the Government’s time frame, we cannot guarantee that all necessary changes will be in place by the Monday deadline.”
Tesco is also understood to have been angered by the lack of notice of the change. “Like most retailers, it would have been easier had we been given more notice. We’ll get on with it and do it, but it would have been better to have more notice,” a spokesman said.
Some retailers moved quickly to implement the change ahead of Monday’s announcement. DSGi made the cut immediately, while John Lewis intended to do so today.
Topics: VAT Cut |
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