Sunday, 23 November 2008

15% VAT?

It is a matter of some moment when the Chancellor of the Exchequer indicates his intention to reduce the standard rate of VAT to the legal minimum, and he is probably right to think that this will bring muffled joy to a great number of consumers and retailers alike, but...

I remember, as the operations manager of a small department store with some 20,000 SKU/PLU stock lines, some held in significant numbers, holding my breath during the budget speeches, awaiting the announcement that rarely came of changes to the standard VAT rate. Why should it be so concerning to an operations manager? Primarily it had to do with my budget, the cost control factors of people and resources. To effect a change across our product range that would retain our compliance with regulations and primary legislation about price labelling meant a huge investment in time and effort to reprice everything that was affected effectively and accurately. Inaccuracies would affect my stock records, create queries which are time consuming to deal with, create non-compliance issues, and ultimately cause my customers to have problems - which as a customer focussed retailer is something I abhorred.

Ah! I hear the comments - but surely a reduction in VAT is a good thing? Yes and no is my best stab at a reply to that one! Sure, the reduction will ensure that people buying standard rated products are spending less - but at this time the signs are that most people are resisting the need to spend money at all, and I have my doubts that a 2.5% reduction in VAT will make a huge impact in that; this is especially so when you consider that those who are spending are doing so on the 'essentials' which will usually include food and children's clothing - most of which is rated in the UK at zero for VAT purposes. So whilst I accept that any reduction is generally a good thing to encourage spending, I believe that the reduction will be insufficient to make the kind of impact on spending that seems to be being posited in the media as the Chancellor's desire. Instead it will be a further cost and distraction from making sales in this key point of the retail year - but I really do hope that I am wrong about this one!

No comments: