vat

[echokilo]

Can anyone tell me what Poundland are planning to do to pass on the VAT decrease? Are the going to become 97.8p - Land?

[Ethel]

The cost of a �1 item - VAT at 17.5% is 85p.

The cost of a �1 item - Vat at 15% is 86.99

Poundland should give everyone 2p back for every �1 they spend.

Do you think they will?

[echokilo]

I hate to say it but your calculations are not correct Ethel. You need to remove 17.5% VAT and then add 15% vat, therefore, the new charge for the same item should be 97.5p (typed as 97.8 in my question in error.... and I have found the answer now for Poundland....

http://business.timesonline.co.uk/tol/business /columnists/article5257409.ece

[Ethel]

echokilo - my calculations are correct. They show the cost per �1 minus the VAT at the different rates.

Poundland will be profiting by nearly 2p for every �1item they sell.

�1.00 - 97.5p is 2.5p. The difference in the VAT rate is 2.5%.

If the item was �1 + VAT, it would have been �1.17.5 at the old rate, and �1.15 at the new - a difference of 2.5p.

Poundland prices are �1 including VAT.

[echokilo]

I think you missed the drift of my question ....... I asked whether they were going to pass the prices drop on!!!??

[BarBill]

Now now calm down people Poundland will of course soon be Euroland so both your calculations will be wrong

[factor-fiction]

The price of �1 included VAT at 17.5%.
The price net of any VAT is �1/1.175= �0.851
The new price should be �0.851 x 1.15= �0.979
So you could argue Poundland should reduce prices by 2.1p.
But of course that's not the point of poundland- their prices stay the same whatever inflation and taxes are.

[Ethel]

Yes, they do, so they will be the ones with an instant 2% increase in profit

[echokilo]

Thanks factor30 - knew my calculation was correct!!!

[factor-fiction]

For existing stock there's an argument for saying Poundland should give a 2% discount off the final bill at the till. But they can sell goods for whatever price they like and I'm sure they'll argue their prices have stayed the same for many years so it wouldn't be unreasonable to put prices up by 2p now. And as they get new stock in, and maybe change their products they can charge what they like.

Moving away from Poundland, I bet the cost of many things won't come down in practice tomorrow.