Will PC retailers pass on the VAT cut?

 

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By Barry Collins

Posted on 25 Nov 2008 at 14:04

Several British PC retailers have promised PC Pro that they will pass on the VAT cut to customers.

Chancellor Alistair Darling yesterday announced that VAT will drop from 17.5% to 15% from Monday, as the Government tries to encourage consumers to start spending again.

PC Pro has contacted several leading manufacturers and retailers to find out whether the VAT cut will be reflected in cheaper PC prices.

A spokesperson for Dell says the company will be adjusting its prices accordingly and promises that "we won't be increasing our margins." HP, meanwhile, says that "we want to make sure our customers see the benefit as soon as possible."

The Dixons Stores Group - which owns PC retailers Currys and PC World - says it is using the new VAT rate already, although prices on its website may not reflect the changes immediately. "When you get through to the checkout, the discount will be applied," a Dixons spokesman tells us.

Apple was unable to comment on its plans at the time of publication.

One problem for retailers is working out how to incorporate the new VAT rate into their traditional £x.99 pricing structures, which are normally inclusive of VAT.

If retailers want to stick with the £x.99 prices, they will either have to bump up their ex-VAT prices - which will mean the savings won't be passed on to consumers - or take a further hit on their margins and round down their ex-VAT prices.

A spokesman for Amazon - which makes wide use of £x.99 prices on relatively low-cost items such as DVDs, books and software - says the company is "looking at the website and how to implement those changes at the moment."

However, he insists that customers won't lose out. "The VAT deduction will result in lower prices," he says.

We'll keep an eye on the retailers next week to see if they keep to their word.