Sunday, 7 December 2008

VAT Savings My Arse

The new 15% VAT rate = a 4p VAT saving on a £1.89 6 pack of toilet rolls

The Government said this month's surprise cut in the rate of VAT from 17.5% to 15% was designed to encourage us to spend money.

The price changes have been a nightmare for retailers - with Christmas prices prepared weeks ago. Many shops are having to make the adjustment at the checkouts - because they've been unable to alter shelf-edge tickets.

However some retailers - especially those selling everyday items - seem to be exploiting a general ignorance about which products attract VAT to simply pocket the difference.

VAT rules are complicated. Buy chocolate biscuits and you'll pay VAT, buy a cake and you won't. Drink bottled water - and tax applies. Want to wipe your bum with toilet paper? You'll have to pay 15% tax too (although you can wipe it with newspaper tax free - there's no VAT on newspapers).

I bought 18 Velvet Triple toilet rolls (3 packs of 6) at high street chain Savers today. The sign above the display showed
the price as £1.89. Another ticket had been added showing £1.87. If you thought this was the VAT reduction you'd be wrong. Deduct 2.13% from £1.89 and the saving is 4p not 2p. Multiply my purchase x3 and Savers has pocketed 6p from the original price it won't be passing on to Her Majesty's Revenue and Customs in tax.

Savers is owned by the same group as Superdrug (A.S. Watson Group).

Next door at Superdrug I brought some Nivea balm on promotion with a 33% reduction over the usual selling price of £4.45. 33% discount is £1.47 producing an offer price of £2.98. The VAT saving to me on this purchase price would have been a further 6p if Superdrug had passed this on in addition to their third off saving promotion - giving a final price of £2.92.

Superdrug's website says 'We are a challenging brand on behalf of our customers'. Superdrug has campaigned for VAT reductions on condoms and sun care products. It is less noisy about the latest VAT cut.

Superdrug aren't the only retailer who have received a 2.5% fiscal boost to their profits. Poundland hasn't reduced it's prices to become 98pLand and 99p Stores haven't rushed to re brand as 97p stores. These chains will simply keep the money they would have handed over in tax.

Many have criticised the VAT cut, pointing out not all the savings will be passed on. Superdrug's saving equals a loss of tax revenue for the Government which we'll all have to repay later through increased taxes.


Anonymous said...

it is adding costs to most things. they come by lorry and the vat was reclaimable the vat reduction on fuel has been replaced with a duty which is not so it has put haulage costs up by two and a half pence on the pound.

The Chief Executive said...

Good point. VAT reductions on alcohol and tobacco were also replaced with increased duty.

This week oil dropped to $40 a barrel and diesel fell below £1 a litre. Expect more government fuel duty increases as the price of fuel continues to fall - although the shockingly bad pound / dollar exchange rate will wipe out at least 25% of those savings.

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