The VAT and duty changes outlined in the Pre-Budget Report look set to cause a retailer hangover that will last well into the New Year.
The warning comes
from accountancy firm EKW Group. Jan Mikula, field operations and compliance manager of the company’s Petrol Convenience and Franchising division, said that in some cases the changes, effective from
December 1, would see retailer costs actually rise.
He said: "It’s a big waste of time, slashing VAT to 15% is not going to make a huge difference as most items sold in a forecourt store, like food, are zero rated anyway. Duty on fuel, alcohol and tobacco is going up, so any price reductions will be evened out." Mikula said there would be minimum effect, even on products which were affected, adding: "The difference on a can of 45p coke will be less than a penny so I don’t see how that’s going to get shoppers rushing in. In fact, retailers will see the prices they pay for some products rise."
For example, the extra 2p of duty on a litre of fuel means every delivery will cost more - there will just be less VAT to reclaim later. The same applies to tobacco and alcohol.
Mikula added: "Retailers I’ve spoken to say they aren’t going to bother changing their prices, it’s too much work. And of course there’s the issue of reprogramming the pos software to update the new VAT rate. It’s not good news for smaller retailers,. It’s an unnecessary imposition - and it will make very little difference in bringing in more customers."
At the time of going to press, opposition MPs were calling on the government to scrap the VAT plans. Industry experts also questioned the report, revealed by the chancellor Alistair Darling on November 25. The Association of Convenience Stores (ACS) said that while it welcomed some of the changes aimed at helping small businesses, the measures did not go far enough. Ray Holloway, director of the Petrol Retailers’ Association (PRA), said: "The chancellor’s good intentions are shown to be rather thin through his plan to increase fuel duty to make up for the loss in VAT income from motor fuels."