Friday, 22 January 2010

VAT Cut "Largely Pointless" for Most Companies.

By Ben Aulakh

Alistair Jones, Director of Public Policy at De Monfort University has described the government’s 2009 VAT reduction as “overall a largely pointless exercise to encourage people to spend more.”

“In reality the VAT reduction didn’t actually have a real overall effect on demand; also the only businesses that benefited were those that didn’t change their prices.

Mr Jones is also sceptical of the negative effect the VAT change has had on business.

“I think that the benefits to business have outweighed the costs, the change in prices that business have had are the same ones done every day on computer at the touch of a button, I don’t think those costs are big costs.

“I don’t know what benefit to customers the VAT cut will have on prices, but I suspect it will have resulted in profiteering, though we don’t know about that yet for sure.”

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