Shops dislike the Vat cut but want it to stay
Fancy that. Those retailers who complained last December that the cut in Vat was too small and wouldn’t work are now complaining that is will end this December.
Groups such as Sainsbury and Mark & Spencer say that returning Value added tax to 17.5 per cent on 31 December will ruin their New Year. No thanks that it will make their Christmas as shoppers rush to beat the tax increase.
When the chancellor announced the temporary tax cut to 15 per cent in last November’s pre-budget report – nicely timed to boost Christmas sales – it was widely denounced as too small to make a difference and too complicated to implement.
Well, perhaps the reduction is not the only reason, but retail sales are surprisingly buoyant. Now, despite the chancellor kindly including a second Christmas in this tax holiday, the nation’s shopkeepers and the British Retail Consortium want it extended for another month because it will be too complicated to adjust the tills and will hit the January sales. Ending the tax-break on 31 December will mean expensive overtime, they complain.
As the shops have had 13 months’ warning that Vat would return to normal levels at the end of this year shops have had plenty of time to plan. They managed to implement the reduction in less than a fortnight.
Reverting to 17.5 per cent Vat will have an impact on inflation in the months before a general election. But if the chancellor can live with that, so should shoppers and retail groups. Each extra month of the tax-break costs £1bn and that means £1bn extra borrowing. The stores groups should be grateful for the help they are receiving now.
