Friday, 19 June 2009
VAT increase angers retailers
Retailers have lambasted Government plans to bring the rate of VAT back up to 17.5% on New Years’ Eve as “insane”. Retailers are angry that the government is planning to increase the tax from its temporary rate of 15% at a key sales period, a move which, they say, will put further strain on the struggling industry.
A spokesman for the Treasury said there were no plans to alter the 13-month scheme.
Well they had better think again. Its the hardest day of the year to get people to work. Its even harder to get sober ones to work. Its also a day when the Head office and administration and IT departments are not usually working. Its a ghost day. Very little happens in the morning but there is a steady flow of the public from around 12pm when they crawl out of bed and bumble around looking for bargains. So quite uniquely the shops get busier as the day goes on, getting to the busiest point at about 5pm when most stores close up. It is a very, very bad day to try and implement a major change like a VAT increase.
Sir Stuart Rose, executive chairman at M&S, said the timing of a return to the 17.5% rate should be discussed with retailers. "Increasing VAT on New Year's Eve is an insane time," he told The Times. "If the Government had any sense, they would delay it for a month. The tax rise is at the worst possible time - right in the middle of the sales period”. The VAT cut was generally seen as pointless, despite positive words from some retailers. The VAT cut wasn't deep enough to 'kick-start' spending and the government claims of family savings of £200 month were quickly downsized to £10 week. It was estimated to cost £90million to implement and it was largely unwelcome. Treasury mandarins seemed to believe that marketing and display departments would love a £21.83 price point, as if they had thousand of unused merchandising cards for oddball prices just sitting in storage.
Sir Stuart is half right.The VAT cut cost £12.5 billion.The Treasury cannot add another billion pounds to its debts. By the 5th January the "sales" are running, but the queues are over. The quietest trading time of the year begins. That is the time to change over. However I fear Mr Rose and the BRC are overlooking something that was very big news when the VAT cut was announced. Something that might make the New Year less jolly..