How will you cope with the VAT changes?

So, the much predicted 2.5% drop in VAT was unveiled yesterday. (Strange how the government claims no leaks and yet all the pundits seemed to have agreed a 15% VAT would be introduced!!). It may not seem much but as one well known supermarket chain is eager to claim – ‘every little helps’.

How will you deal with the cut? Will you go around and reduce your £29.99 dresses to £29.35? Will you put larger discounts on some items (slow moving stuff) and nothing on others? How will the public react to that? What about giving a general 2.1% discount on all items at the point of paying?

“Hey, wait a minute! What do you mean 2.1%? The VAT has been reduced by 2.5%” I can hear Joe Public shout.  Now you try an explain to our mathematically challenged customers that an item costing £100 + VAT means it is reducing from £117.50 to £115.00 which is actually a reduction of 2.12766% (to 6 significant figures) from the selling price.

Quite frankly if would have been simpler all round if personal income tax allowances would have increased with immediate effect meaning a  nice bonus in the November wage packet with 8 months extra tax allowances (Tax year April – Nov) and then a little extra each month thereafter. However, this would not have helped the unemployed unless you increased the pensions and tax credits (or whatever user friendly buzz words are used nowadays for the ‘dole’) and then, heaven forbid, the ungrateful consumer decides to save it instead of passing it on to the hard pressed retailers in exchange for stuff they probably didn’t need anyway.

I understand Philip Green is sitting down on Tuesday with his managers to discuss how best to pass on the reduction. Perhaps we can just make it easy and change the existing signs in the windows to 22.1% OFF EVERTHING……. or should that now be 21.7% OFF EVERYTHING (you do the maths!!!)

Tony Heywood – Gilcrest Services Ltd
Retail Troubleshooter
Rescue and Recovery Consultant

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