A number of trade bodies have expressed concern about the effect of the emergency budget on the IT retail trade.
Unlike B2B business models, whereby the company is VAT registered and eligible to claim it back, the only choice for retailers is to pass the tax on to the consumer. The real possibility of rising High Street prices has lead many to speculate that following a pre-Christmas boost in sales, early 2011 could be a deathly quiet time for retailers.
“This is a necessary evil, but I’m fearful for some retailers as it compounds other problems brought on during the recession,” said the managing director of the National Buying Group, Phylip Morgan. “This could push some retailers over the edge.”
However, the chairman of the TCA Keith Warburton is more optimistic about the move: “This may make a difference to some purchases, but in my experience consumer spending is based on needs rather than price, so I don’t think a relatively small change to VAT will make a huge difference to peoples’ buying habits.”
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