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VAT Cut Fails to Boost Spending
Listed under: News
Published: Tuesday, September 15, 2009
The VAT reduction last year has had little or no impact on customer spending, according to a recent report from market research company, PricewaterhouseCoopers.
The measure – which saw the Government lower the rate from 17.5% to 15% last December – has done nothing to boost consumer morale, says the study, seeing only eight percent of people increase their spending as a result.
The findings reveal that, despite the VAT cut, 88% of people have not increased their spending over the last few months, with five percent not even knowing the changes had come into effect.
Commenting on the findings, Stephen Coleclough, tax partner at PricewaterhouseCoopers, says, "These figures show that, despite it being designed as an economic stimulus, the vast majority of consumers' spending has been unaffected by the VAT cut. The rest of the year will demonstrate whether the reduction can still have the desired effect. It will be interesting to see whether it is affected by retailers potentially bringing forward their New Year sales in anticipation of a VAT hike in January."
Glyn Rowe, director of online scrapbooking specialist, Memory Keepsakes, agrees the VAT cut has had little impact. “It has not made one iowta of difference to our business – largely because the prices of the products we sell are so low. While it has probably had a much bigger influence on the cost of larger purchases, such as cars and houses, when it comes to something like scrapbook papers, the change in price has been minimal, literally amounting to a penny or two here or there.
“As far as I can see, the VAT cut has done nothing to boost consumer morale and thus far all it has done is cause retailers a lot of unneccessary stress and hard work to very little effect,” he adds.
And, according to Mr Rowe, returning the rates to normal this December will cause even greater stress. “It will just be more hard work and paperwork for independent retailers, placing them under even greater pressure at a time when they need all the help they can get.”
The measure – which saw the Government lower the rate from 17.5% to 15% last December – has done nothing to boost consumer morale, says the study, seeing only eight percent of people increase their spending as a result.
The findings reveal that, despite the VAT cut, 88% of people have not increased their spending over the last few months, with five percent not even knowing the changes had come into effect.
Commenting on the findings, Stephen Coleclough, tax partner at PricewaterhouseCoopers, says, "These figures show that, despite it being designed as an economic stimulus, the vast majority of consumers' spending has been unaffected by the VAT cut. The rest of the year will demonstrate whether the reduction can still have the desired effect. It will be interesting to see whether it is affected by retailers potentially bringing forward their New Year sales in anticipation of a VAT hike in January."
Glyn Rowe, director of online scrapbooking specialist, Memory Keepsakes, agrees the VAT cut has had little impact. “It has not made one iowta of difference to our business – largely because the prices of the products we sell are so low. While it has probably had a much bigger influence on the cost of larger purchases, such as cars and houses, when it comes to something like scrapbook papers, the change in price has been minimal, literally amounting to a penny or two here or there.
“As far as I can see, the VAT cut has done nothing to boost consumer morale and thus far all it has done is cause retailers a lot of unneccessary stress and hard work to very little effect,” he adds.
And, according to Mr Rowe, returning the rates to normal this December will cause even greater stress. “It will just be more hard work and paperwork for independent retailers, placing them under even greater pressure at a time when they need all the help they can get.”
