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Tax Rise Not Expected to Affect Retail
Listed under: News
Published: Thursday, August 26, 2010
The VAT increase next year is unlikely to impact independent retailers in 2011 and could even provide a much-needed boost to the sector over the next few months as consumers attempt to make the most of the lower prices on the market, a recent report has claimed.
The findings from the KPMG/Synovate Retail Think Tank (RTT) suggest that the rise is the best possible option for businesses within the category, claiming that a sharper increase in direct taxation would have been much worse for retailers.
The research also implies that despite its poor timing – 4th January 2011, which is traditionally one of the busiest trading periods for retailers in the UK and has led to many accusing the Government of placing heavier burdens on store owners at the worst possible period – the change in tax and its date could actually work in people's favour, giving them valuable time to prepare.
The Office for Budget Responsibility estimates that the two and a half percentage point increase in VAT will raise approximately £12.1 billion in revenue during 2011, reaching a staggering £13.4 billion by 2014.
Commenting on the issues addressed in the report, Helen Dickinson of KPMG, says, “Retailers’ need and desire to increase prices in advance of the rise, in order to protect margins which have been severely affected over the past two tough years, may have an impact on the headline inflation figures.”
She adds, “This, coupled with rising food prices and the additional supply-led pressures already in the market, will create pressure for interest rates to be raised. Such a scenario would create a far more dramatic squeeze on consumer income which, in turn, would threaten spending levels far more significantly than the VAT rise in isolation.”
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The findings from the KPMG/Synovate Retail Think Tank (RTT) suggest that the rise is the best possible option for businesses within the category, claiming that a sharper increase in direct taxation would have been much worse for retailers.
The research also implies that despite its poor timing – 4th January 2011, which is traditionally one of the busiest trading periods for retailers in the UK and has led to many accusing the Government of placing heavier burdens on store owners at the worst possible period – the change in tax and its date could actually work in people's favour, giving them valuable time to prepare.
The Office for Budget Responsibility estimates that the two and a half percentage point increase in VAT will raise approximately £12.1 billion in revenue during 2011, reaching a staggering £13.4 billion by 2014.
Commenting on the issues addressed in the report, Helen Dickinson of KPMG, says, “Retailers’ need and desire to increase prices in advance of the rise, in order to protect margins which have been severely affected over the past two tough years, may have an impact on the headline inflation figures.”
She adds, “This, coupled with rising food prices and the additional supply-led pressures already in the market, will create pressure for interest rates to be raised. Such a scenario would create a far more dramatic squeeze on consumer income which, in turn, would threaten spending levels far more significantly than the VAT rise in isolation.”
What do you think? Email your thoughts to .(JavaScript must be enabled to view this email address)
