Retailers plan for end of VAT cut

Date: 21st October 2009

British retailers face severe administrative pressures as the temporary VAT cut ends on New Year's Day.

Writing on Telegraph.co.uk, the Daily Telegraph's retail editor James Hall suggested that shopkeepers are unhappy with the time burden of changing their price labels in the middle of their Christmas discount sales.

The report added that around 250,000 man hours will be spent on this task by Debenham's staff alone.

VAT was cut from 17.5 per cent to 15 per cent by the government last year in a bid to make consumer prices cheaper and pep up demand.

In turn, it was hoped, this would lessen the impact of the recession on the UK high street.

However, reducing taxes in this way leads to consequent losses of revenue for the government itself.

With public deficits to increase by £175 billion or more in 2009, it is very unlikely that the VAT cut will be extended into 2010.

Mr Hall also pointed out that some Christmas presents might be purchased by the gift giver at 15 per cent VAT - and then returned to shops by the recipient after the rate reverts to 17.5 per cent.

"This is basically a tax on not liking your Christmas presents," he added.

"A Bah Humbug Tax, if you like."