Monday, Nov 24, 2008
Retailers say VAT cut isn't enough to save the High Street
Daily Telegraph: VAT cut is not enough to save the High Street
Leading retailers fear the VAT cut will be too little to save the British high street as the latest figures show "unprecedented" sales are failing to get shoppers to part with their cash.
Posted by ben hazell @ 10:14 AM (592 views) Add Comment
11 Comments
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1. mark wadsworth said...
If you believe the Big Fat Lie that VAT is a tax on consumption ‘borne by the consumer not the producer’ you won’t understand the point of the VAT cut.
However, if you understand the distinction between ‘legal and economic incidence of a tax’, you will realise that it is a tax on turnover (or, if you twist my arm, a tax on gross margins, let’s not split hairs). Ergo it is a tax on business.
I don’t expect that businesses will ‘pass on’ the VAT cut, because retail prices are set by supply and demand in the shops. If M&S have to cut prices by 20%, then they will.
But the reduction will allow businesses to keep an extra 1.85p for every £1 gross turnover, which might be enough to keep a few more businesses afloat than would otherwise have failed.
And let’s not forget that once you strip out banks and North Sea Oil, the rest of UK plc pays four times as much in VAT as in corporation tax. So a 2.5% VAT reduction is worth as much to them as a 14% reduction in corporation tax.
Here endeth.
2. planning4acrash said...
It will do nothing, because, it will be purely from printing money, so, you get a small discount for a short while, but prices will be inflated by more than the cut in taxes once the new funny money runs through the system, enriching government and corporations at YOUR expense.
3. mark said...
mark W, yes it might save a few, but I think a few biggies will go bust
4. planning4acrash said...
VAT is being cut, and other taxes will have to be cut, because Government will not get income without tax cuts. They must stimulate the economy with tax cuts to get any milk from the sheople.
So, not only are we on a race to the bottom in terms of cuts (people won't take government funny money unless it is worth less, making it worthless) - So to are we on a race to the bottom in terms of taxes. Right now, government are pushing on a string. They higher taxes are, the less revenue they receive, if taxes remain this high, revenue will decrease.
What we are seeing is a meltdown of big government. The parasite is killing the host, and, will kill itself. Lets hope my prediction is correct, that we collapse into England, Ireland, Scotland and Wales, Possibly with other smaller areas going for tax free status, Isle of Wight, Cornwall, those hit first and worst will be the ones to lead the charge. If government don't make the change peaceably, then we will see tax revolts and revolution. Yes, the police state is at hand, but there are 50million of us, a few thousand of them. No army can hold back an idea when its time has come.
5. planning4acrash said...
If that collapse occurs, we could see regulation just slashing overnight. Farmers, overnight, being able to sow as much crops and whatever crops they like, Monsanto without central bank support. Mines re-opening to boost the economy, just freedom, liberty, happiness, a feeling of with, strong patriotism and community.
6. doom&gloom said...
P4AC. My vision of a future without a functioning central government is nowhere near as rosy as yours. I think your version depends on the majority of the population being as benign and peaceful as we are.
You can see what happens when even small areas of a country are out of control (eg. in New Orleans or examples from the Camden New Jornal!) I see escalating crime, illness, pollution, and conflict. I see people turning on each other rather than on their governments, but I hope I'm wrong.
7. Wofmd said...
When does the VAT reduction take effect?
If a retailer currently has a good priced at £29.99, will they just adjust the net/VAT elements and still charge £29.99...? Lets see.
I would imagine it would be a bit of a nightmare for retailers ot change price tags/computer systmes etc... at short notice.
8. mark wadsworth said...
WOFMD, Next Monday, allegedly.
Of course this change won't affect prices in the shops. That's because VAT is a turnover tax, it cannot influence end prices which are influenced by supply and demand (well it can, but not as much as you think).
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