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Retailers to minimise impact of VAT increase

Retailers to minimise impact of VAT increase

Game has said it will work to minimise the impact of the VAT increase in the UK.

Following the VAT in the United Kingdom yesterday, which upped the VAT rate from 17.5 per cent to 20 per cent, game retailers have increased their prices.

Some retailers, however, such as Game and GameStation, have indicated that they plan to minimise increases as much as possible and try to return prices to normal.

The VAT increase means that games which previously cost £39.99 have been increased to £40.99 RRP - a change reflected both in online and high street retailers. MCV has already confirmed price hikes for leading retailers Game, Amazon and Argo.

'We are working hard with our suppliers to minimise the impact of the VAT rise on product prices but from 4 January 2011, customers will see some increase in our in-store and online prices,' a Game representative said.

'However every week, customers will also see that we have a wide range of special deals and promotions that offer a greater discount than the VAT rise and offer incredible value for our customers. These will continue in 2011 and we are confident that customers will see that we provide value and expertise that they can not find anywhere else.'

Let us know your thoughts in the forums.

39 Comments

Discuss in the forums Reply
LeMaltor 5th January 2011, 11:12 Quote
this sucks ;(
adam_bagpuss 5th January 2011, 11:13 Quote
game dont offer good prices anyway as they are always about 15-50% more expensive than online so not fussed
Cei 5th January 2011, 11:37 Quote
Please replace the article image with this one: http://buls.files.wordpress.com/2010/02/osborne21.jpg
Mattmc91 5th January 2011, 11:41 Quote
Cei, have a rep.
Farting Bob 5th January 2011, 12:25 Quote
Ive seen alot of companies already up prices of a variety of things, some now have weird prices (35.61 etc) but alot are just rounding up to the nearest nice number, milking a bit more profit and blaming the VAT increase.
LeMaltor 5th January 2011, 12:41 Quote
You can't have 35.605 though can you? And companies want to make money so of course they are gonna round up and not down :p
adam_bagpuss 5th January 2011, 12:42 Quote
i think he means like instead of 35.61 just doing 36.99 or 35.99 etc
maximus09 5th January 2011, 12:45 Quote
I have seen some retailers increase their prices between 10-15% even though it is only a 2.5% increase. I guess they are trying to cash in on the rise and blame the government.

For example: Amazon.co.uk offered the Nintendo Wii for £150 before the rise and now it's £164. I'm not good at maths but I think that is more than 2.5%?
Cupboard 5th January 2011, 12:51 Quote
yes: 1.2*(150/1.175)=£153.19
Even if you just add a straight 2.5% on that's still not right.
Paddy 5th January 2011, 13:38 Quote
Retailers will definitely use this as an excuse to over inflate their prices.

If you do the sums, the actual increase in selling price is only 2.1%, as the 2.5% increase is related to only the VAT proportion.

Therefore in the above example the selling price should go from 39.99 to about 40.83! They are going to start taking advantage of people who don't realise the true costs!
Hovis 5th January 2011, 13:40 Quote
There needs to be a statue to commemorate this government. A hundred metre high face buried in a colossal granite palm.
Lizard 5th January 2011, 14:01 Quote
Quote:
Originally Posted by Hovis
There needs to be a statue to commemorate this government. A hundred metre high face buried in a colossal granite palm.

Don't give them ideas - they're already incredibly good at wasting huge sums of money!
jrs77 5th January 2011, 14:07 Quote
Stop complaining. We've got 23% VAT since last year and had 22% before that for several years allready.

Even with the increased VAT the UK is still the cheapest country in europe to buy electronics.
robump 5th January 2011, 14:16 Quote
I really dont think this is a great time to put the VAT up to 20%, it gives out the wrong impression to the economy, we are starting to show signs of a slow recovery and an increase in VAT will only discourage spending and artificially increase inflation.

Also no matter what they say VAT is not a progressive tax, it hits the poor hardest simply because we all pay the same rate, no getting away from it!!
Lance 5th January 2011, 14:25 Quote
Quote:
Originally Posted by robump
I really dont think this is a great time to put the VAT up to 20%, it gives out the wrong impression to the economy, we are starting to show signs of a slow recovery and an increase in VAT will only discourage spending and artificially increase inflation.

But the money has to come from somewhere. I think its much better this way than taking it out of your income or national insurance.

Quote:
Originally Posted by robump
Also no matter what they say VAT is not a progressive tax, it hits the poor hardest simply because we all pay the same rate, no getting away from it!!

At least this way you can choose not to spend on non essentials, I know thats hard but unlike your income tax it is possible (remember that basic food and gas/electric vat hasn't changed).

I definatly agree that it sucks that everything has got more expensive, but the government always said this had to happen.
javaman 5th January 2011, 14:27 Quote
Quote:
Originally Posted by Paddy
Retailers will definitely use this as an excuse to over inflate their prices.

If you do the sums, the actual increase in selling price is only 2.1%, as the 2.5% increase is related to only the VAT proportion.

Therefore in the above example the selling price should go from 39.99 to about 40.83! They are going to start taking advantage of people who don't realise the true costs!

true but vat impact more than just the item, fuel to get deliveries to the shop ,for example is effected too. tho yes, the VAT increase on items is suspiciously high in some cases like the local £1 shop reducing offers from 5 for a £1 on can to 3 for a £1 and now charging for bags (which is where they said they would absorb the cost) Last time VAT dropped to 15% nothing reduced in price yet when it went back up to 17.5 prices went up! Best example was bus fares, £1.50 a single is now £2.00 in that space of time and I bet prices will go up again.
ev1lm1nd666 5th January 2011, 14:28 Quote
Quote:
Originally Posted by Lizard
Quote:
Originally Posted by Hovis
There needs to be a statue to commemorate this government. A hundred metre high face buried in a colossal granite palm.

Don't give them ideas - they're already incredibly good at wasting huge sums of money!

And anyway, they'd end up making it out of concrete and it would still cost more than they first predicted lol
tristanperry 5th January 2011, 14:37 Quote
<Mini_rant>
Well Labour handled our economy awfully for 13 years (economy was stable for 10 years and they over-spent despite Gordon 'I saved the World' Brown's golden rules of fiscal spending, and then things just skyrocketed when the recession hit).

So a VAT rise to 20% was inevitable (especially since Labour also cocked up by lowering VAT to 15%, wasting billions without raising consumer spending).

I know that people like to be lied to by politicians and be told that everything will be awesome without anything changing, but the truth is that these cuts and tax rises are sadly necessary. Which is why Labour support most of them, despite their pre-election lies that they wouldn't have made cuts (which we know now - thanks to leaked documents - were false since they were planning on making big cuts).

Ah well, having a good moan because a polical party is actually sticking to their election promises is always fun I guess. No wonder politicians lie so much: it's what the public want. Tell the truth and stick to election promises (ala Tories) and get slated. Lie, lie, lie (ala Labour) and win support.

This is why politics sucks. Not because of politicians. But because the public vote for lies.

</Mini_rant>

Anywhoo, it's annoying that retailers are using this as an excuse to screw consumers. I know that retail was hit with the recession, but 10% price hikes over just 2.5% tax rises will just backfire IMO.
azrael- 5th January 2011, 14:37 Quote
Although I can certainly commiserate, in Denmark we've had a VAT of 25% for ages (read: since 1992, up from 22% since 1980). Oh, and our VAT is 25% on everything. There's no differentiation like in some countries (don't know if it applies to the UK, though). Also, whenever we buy a car we get to pay for three.
jrs77 5th January 2011, 14:50 Quote
Quote:
Originally Posted by azrael-
Although I can certainly commiserate, in Denmark we've had a VAT of 25% for ages (read: since 1992, up from 22% since 1980). Oh, and our VAT is 25% on everything. There's differentiation like in some countries (don't know if it applies to the UK, though). Also, whenever we buy a car we get to pay for three.

Yeah, that's exactly the problem within europe imho.



On another note, if anything then VAT and all other taxes should be all the same within the EU, but as no country want to give up their sovereignity all the countries within the EU will continue to fail with their economy within the next 10 years.
The little recovery in the UK and the good recovery in germany are bought with the money of the other EU-countries actually. Germany exports some 60% of their goods into EU-countries for example.
The northern countries of the EU are playing an economical game against the southern countries and we see where this is heading, do we?
Portugal and Spain are the next ones we've to pay for with the money we made by destroying their economy to save ours.
Tattysnuc 5th January 2011, 14:58 Quote
Quote:
Originally Posted by robump
I really dont think this is a great time to put the VAT up to 20%, it gives out the wrong impression to the economy, we are starting to show signs of a slow recovery and an increase in VAT will only discourage spending and artificially increase inflation.

Also no matter what they say VAT is not a progressive tax, it hits the poor hardest simply because we all pay the same rate, no getting away from it!!

I'm getting sick of reading about how a VAT increase effects "only the poorest."

FOOD is excempt (except luxury items)
CHILDRENS CLOTHES and SHOES are exempt.
ENERGY for heating your home is excempt.

these things are essentials for living.

You are paying more on your phone bill, broadband, cosmetics, clothes, literature, white goods and technology.

If people are buying lots of these items then how can they be referred to as "the poorest". Surely if they were taxing those items that were FUNDAMENTAL, then that would target the poorest, but otherwise, please leave it out.

Petrol's gone up 3p a litre. That's £1.20 a tank on a small car. Petrol is an expensive commodity that's a limited and ever depleting resourse. Similarly money is a limited resourse that people are borrowing more and more of, and I believe it is easier to access, and they are using this to pay for items that are outdated before the debt for the item is paid for - that's just madness!

I know no-one wants to pay more for anything, but people have to realise that in a capitalist world, everything has a cost attached. Britain as a country is no longer self sufficient and has not been for a centrury, and to deal with the growth in poulation and economic growth, it has outsourced a lot of it's "production" and therefore JOBS. While companies are outsourcing they see money savings.
The down side is that the countries that win those outsourced jobs pick up the longer term economic benefits as more of their potential workforce become engaged in work. As soon as the financial incentives are removed, the jobs are moved on to the next subsidised nation. Look at the UK gaming industry as an example. Look at the Irish economy as another example.

The UK's problem is that to live here costs too much. Costs have grown and grown over the last 10 years, and we're finally being made to pay for it.

If everyone contributed then the burden would be lightened. If the cost of administering Government was reduced, then the cost to everyone would be reduced.

There doesn't appear to be a quick fix to this.

We've "had it good" (that's painful to say, so please don't pull me up on that) and the taxpayer has absorbed the cost of paying for a govenment that's become bloated and unwieldy in size. We've also increased the size of the NHS (which is still one of the worlds largest "employers!). Something has to give SOMEWHERE! Either that, or the pound devalues significantly on the international money market. Maybe it's time to financially tie to the States or Europe and fix exchange rates... We're too small a player in the global market now.

The options appear to only be to cut govenement spend or increase govenment income or fiscally link with a bigger player and work with them to keep trading internal to both countries.
Tangster 5th January 2011, 15:28 Quote
Quote:
Originally Posted by javaman
true but vat impact more than just the item, fuel to get deliveries to the shop ,for example is effected too. tho yes, the VAT increase on items is suspiciously high in some cases like the local £1 shop reducing offers from 5 for a £1 on can to 3 for a £1 and now charging for bags (which is where they said they would absorb the cost) Last time VAT dropped to 15% nothing reduced in price yet when it went back up to 17.5 prices went up! Best example was bus fares, £1.50 a single is now £2.00 in that space of time and I bet prices will go up again.

Count yourself lucky. I went home over Christmas and bus fares for a single are £2.80. Two years ago it was £1.20.
Similar thing with oil/gas. If the market spikes then we get a nice price rise almost instantly(well within a month or so) and "ohh, but we need to cover costs!" but when they fall back down again it's "We can't bring the prices down, we bought the oil/gas at a higher price."
REMF 5th January 2011, 16:13 Quote
"I'm getting sick of reading about how a VAT increase effects "only the poorest."
FOOD is excempt (except luxury items)
CHILDRENS CLOTHES and SHOES are exempt.
ENERGY for heating your home is exempt."

Quite right.
kenco_uk 5th January 2011, 16:37 Quote
Quote:
Originally Posted by Tattysnuc
FOOD is exempt (except luxury items).

Is cheesecake a luxury item?
I thought it was a necessity?
I might have to ration myself... cripes.
tristanperry 5th January 2011, 16:56 Quote
Quote:
Originally Posted by Tattysnuc
I'm getting sick of reading about how a VAT increase effects "only the poorest."

FOOD is excempt (except luxury items)
CHILDRENS CLOTHES and SHOES are exempt.
ENERGY for heating your home is excempt.

these things are essentials for living.

You are paying more on your phone bill, broadband, cosmetics, clothes, literature, white goods and technology.

If people are buying lots of these items then how can they be referred to as "the poorest". Surely if they were taxing those items that were FUNDAMENTAL, then that would target the poorest, but otherwise, please leave it out.

Petrol's gone up 3p a litre. That's £1.20 a tank on a small car. Petrol is an expensive commodity that's a limited and ever depleting resourse. Similarly money is a limited resourse that people are borrowing more and more of, and I believe it is easier to access, and they are using this to pay for items that are outdated before the debt for the item is paid for - that's just madness!

I know no-one wants to pay more for anything, but people have to realise that in a capitalist world, everything has a cost attached. Britain as a country is no longer self sufficient and has not been for a centrury, and to deal with the growth in poulation and economic growth, it has outsourced a lot of it's "production" and therefore JOBS. While companies are outsourcing they see money savings.
The down side is that the countries that win those outsourced jobs pick up the longer term economic benefits as more of their potential workforce become engaged in work. As soon as the financial incentives are removed, the jobs are moved on to the next subsidised nation. Look at the UK gaming industry as an example. Look at the Irish economy as another example.

The UK's problem is that to live here costs too much. Costs have grown and grown over the last 10 years, and we're finally being made to pay for it.

If everyone contributed then the burden would be lightened. If the cost of administering Government was reduced, then the cost to everyone would be reduced.

There doesn't appear to be a quick fix to this.

We've "had it good" (that's painful to say, so please don't pull me up on that) and the taxpayer has absorbed the cost of paying for a govenment that's become bloated and unwieldy in size. We've also increased the size of the NHS (which is still one of the worlds largest "employers!). Something has to give SOMEWHERE! Either that, or the pound devalues significantly on the international money market. Maybe it's time to financially tie to the States or Europe and fix exchange rates... We're too small a player in the global market now.

The options appear to only be to cut govenement spend or increase govenment income or fiscally link with a bigger player and work with them to keep trading internal to both countries.
This. Quality post
mclean007 5th January 2011, 19:01 Quote
Quote:
Originally Posted by robump
I really dont think this is a great time to put the VAT up to 20%, it gives out the wrong impression to the economy, we are starting to show signs of a slow recovery and an increase in VAT will only discourage spending and artificially increase inflation.

Also no matter what they say VAT is not a progressive tax, it hits the poor hardest simply because we all pay the same rate, no getting away from it!!
Seriously - that argument? VAT is a tax on consumption - the less you consume the less you pay, and (as has been mentioned) essential food items, children's clothing, etc. are zero rated and household energy (and some other products) are subject to only 5% VAT, so in what sense does this affect the poorest (whose spend on main rate taxable items should be lower) worse than the richest (whose spend is likely to be significantly higher, commensurate with their greater earnings and - generally - proportionally greater discretionary income)?

In any event, it's not like there have been tax cuts for higher earners - in fact the effective tax rate for earnings between £100,000 and approx £113,000 is now 60% (thanks to the arbitrary removal of the personal allowance - thanks Gordon and Alistair for that tasty bit of stealth tax genius as a parting shot), and the rate for earnings over £150,000 is now 50%. Compare this to the flat 40% for earnings over approx £40k that we had a year ago, and it's clear that the wealthier are bearing a disproportionate share of the burden of repairing the country's finances. You may well argue that that is as it should be - those with the broadest shoulders bear the greatest burden, etc. - but don't trot out that tired old "it hits the poorest hardest" nonsense because it's hogwash.
mclean007 5th January 2011, 19:05 Quote
Quote:
Originally Posted by Tattysnuc
...
Couldn't agree more! Though two factual points - first off, kids' clothes, basic foods etc. aren't exempt, they are zero rated. There is a subtle difference but it's worth pointing out. Technically they are subject to VAT, it's just that the rate is 0%. Sorry for that bit of pedantry - I'm a tax lawyer you see!

Secondly, domestic energy isn't exempt or zero rated - it's subject to VAT but at the lower rate of just 5%, which hasn't changed.
PabloFunky 5th January 2011, 19:08 Quote
Even though food is exempt from tax, petrol/diesel isnt and the cost of the food being delivered will be more, and natrually this will be added to the price of the goods,
so no tax, but price increase because of the tax still.

So many things like this get overlooked and at end of day, the tax payer will still be the loser as usual.
mclean007 5th January 2011, 19:20 Quote
Quote:
Originally Posted by PabloFunky
Even though food is exempt from tax, petrol/diesel isnt and the cost of the food being delivered will be more, and natrually this will be added to the price of the goods
Except it won't, because the delivery companies will be fully taxable and will be able to recover the VAT they pay. Same for the supermarkets and everyone else in the supply chain. So if fuel costs £1 + VAT per litre, then pre-increase it was £1.175 and now it's £1.20 inc VAT, but the delivery company recovers £0.175 (pre-increase) and £0.20 (now), so the cost to them remains the same. This is actually the subtle distinction between zero rated and exempt supplies - if food was exempt, then the companies in the supply chain wouldn't be able to recover VAT on purchases they make in order to supply the food (e.g. fuel) so the increase in VAT on fuel would impact final food prices. As food is zero rated, however, the companies in the supply chain can recover their VAT in full.

Food prices are far more affected by currency fluctuations and supply side factors like weather affecting yield, than by tax. This is particularly true in the case of 'basic' foodstuffs - as an example, a series of worldwide failures in what crop in 2010 led to an increase in the price of wheat and flour, but it was also reported in August that this would have knock-on effects on meat prices because animal feed would become more expensive so it would cost more to rear animals (link: http://www.telegraph.co.uk/finance/markets/marketreport/7946789/Meat-prices-set-to-jump-after-wheat-crop-failures.html).

I think they should teach basic economics like this in schools - otherwise people who don't understand the forces at play have a tendency to blame government. The government has a lot to answer for, but food prices are generally beyond its influence.
sharpethunder 5th January 2011, 19:26 Quote
WELL the best way of putting it for every £100 you spend you have to £2.10 in vat
sharpethunder 5th January 2011, 19:27 Quote
Quote:
Originally Posted by sharpethunder
WELL the best way of putting it for every £100 you spend you have to pay £2.10 in vat
frontline 5th January 2011, 19:55 Quote
Surprised nobody has noticed that you also have to pay an extra 1% for Insurance Premium Tax as of 04/01/11 too (5% up to 6%). Stealth taxation ftw...
leexgx 6th January 2011, 02:22 Quote
when VAT went down to 15% my thought was pointless as retailers would not pass that onto the customers as it benefited them with profit or at best it would of levelled of the cost of having to reprogram all the till systems to correct the VAT on the systems (as vat has never changed for so long a lot of system are hard coded for 17.5%) that issue is mostly for smaller shops as there turnover is smaller

when it when back up to 17.5% prices went up from the norm prices and now 20% even more so (more then then 2.5 or 5% price hike)

should of just left VAT at what it was they are sifting us on other stuff any way
xaser04 6th January 2011, 10:22 Quote
Quote:
Originally Posted by Tattysnuc
Quote:
Originally Posted by robump
I really dont think this is a great time to put the VAT up to 20%, it gives out the wrong impression to the economy, we are starting to show signs of a slow recovery and an increase in VAT will only discourage spending and artificially increase inflation.

Also no matter what they say VAT is not a progressive tax, it hits the poor hardest simply because we all pay the same rate, no getting away from it!!

I'm getting sick of reading about how a VAT increase effects "only the poorest."

FOOD is excempt (except luxury items)
CHILDRENS CLOTHES and SHOES are exempt.
ENERGY for heating your home is excempt.

these things are essentials for living.

I am going to nit pick here...

Childrens clothes and shoes are Zero rate NOT exempt. There is no difference to the price you pay but there is a very important distinction.

Energy for heating your home (domestic use) incurs VAT of 5%, it is NOT exempt.

The rest of your points (and general tone of your post) I agree with.
Cupboard 6th January 2011, 11:43 Quote
It is nice to read some people actually pointing out the other side of the coin for once, rather than just the usual "oh no, costs!"

I'm a little scared that even despite all this, the amount we're borrowing each year is still going to be *huge*. It took me a long time (too long) to realise that the deficit wasn't our debt, but the amount our debt is increasing every year. I also find it quite incredible that we managed to get into this situation, while we kept being told that the people in charge were the best thing that the economy had ever had and "no more boom and bust". Ah well.
mclean007 6th January 2011, 12:38 Quote
Quote:
Originally Posted by xaser04
I am going to nit pick here...

Childrens clothes and shoes are Zero rate NOT exempt. There is no difference to the price you pay but there is a very important distinction.

Energy for heating your home (domestic use) incurs VAT of 5%, it is NOT exempt.

The rest of your points (and general tone of your post) I agree with.
Already covered these points in my post above. The exempt / zero rated distinction is as you say significant, and is (briefly) explained in my other post above.
sausages 6th January 2011, 17:23 Quote
Well "the poor" will still be affected by it one way or another. Just because there'll be no big increases on kids clothes etc, doesn't make much difference. To truly poor people, every quid matters, so this is all going to be a big deal to them. It already costs a lot to live here, not it will be even more.
tristanperry 6th January 2011, 17:44 Quote
Quote:
Originally Posted by sausages
Well "the poor" will still be affected by it one way or another. Just because there'll be no big increases on kids clothes etc, doesn't make much difference. To truly poor people, every quid matters, so this is all going to be a big deal to them. It already costs a lot to live here, not it will be even more.
Well it's a pitty that this country's finances are in such a mess then. Something needs to be done. Even the people who caused this mess (Labour) agree on that.

There's no perfect solution, although the current measures hit "the rich" more than "the poor" (even though we're already towards the peak of the Laffer curve, in my opinion). Plus despite the crappy finances and various measures which Labour introduced which screwed "the poor" (10p tax rate abolishment, mountains of stealth taxes, etc etc), there are some positives coming out from the coalition which will benefit "the poor" (increasing the personal tax allowance, a rise in the minimum wage which is higher than the average private sector pay rise during the recession years, etc). And also part of the point of sorting out the debt is that it'll help to bring confidence in the markets back.

In the medium to long term, these measures will help. Sure they'll hurt in the short term, but 13 years of crappy economic management can't be sorted out overnight.

At least the coalition is happy to do the unpopular even if the positive effects probably won't be felt until the next parliament; Labour's policy almost seemed to be to do anything which is popular in the short term, even if it screwed things for the future.

Sadly, this tactic got votes.

That doesn't mean it's a good tactic for the economy/country's finances, though.

*Shrugs*


Anywhoo, I'd be interested to hear an alternative set of overall measures to sort out the mess of the country's finances? :)



Edit: Ignore post; is a bit off-topic plus online political debates are seldom useful :) ;)
javaman 6th January 2011, 20:53 Quote
Quote:
Originally Posted by azrael-
Although I can certainly commiserate, in Denmark we've had a VAT of 25% for ages (read: since 1992, up from 22% since 1980). Oh, and our VAT is 25% on everything. There's no differentiation like in some countries (don't know if it applies to the UK, though). Also, whenever we buy a car we get to pay for three.

You could always shop in Germany. Like I could shop in Ireland, if it wasn't in a worse state than here. Least fuel is still cheaper there so not all bad! (Family in Donegal means im there about once a week)

Quote:
Originally Posted by Tangster
Count yourself lucky. I went home over Christmas and bus fares for a single are £2.80. Two years ago it was £1.20.
Similar thing with oil/gas. If the market spikes then we get a nice price rise almost instantly(well within a month or so) and "ohh, but we need to cover costs!" but when they fall back down again it's "We can't bring the prices down, we bought the oil/gas at a higher price."

I do! Mainland transport is considerably worse. I can't comment on train fare cost here since I haven't used one in 10 years so I have nothing to compare to but since we're currently screwing up on upgrading them (buying trains that can't run on the lines only to be forced to spend on upgrading the lines to run them) they're prices are stupidly high to start with! We saved a fortune on fuel this year by lighting the open fire. My uncle digs his own turf and we got some off him for helping him dig it. We also burned alot of crap since the bin men couldn't collect it. Problem is big corporate monoplies. We only have one electric provider in Northern Ireland which doesn't help prices.
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