Reduced VAT not coming through in reduced prices.

Taxi Drivers

Table taken from this short piece.



Outside of newspapers, nothing fell by the full amount of the VAT reduction.

SBWife

The reduction didn't happen in a vacuum the costs of other inputs and demand conditions where also changing during the time period.

Eg. accommodation services: June is still shoulder season while July is high season hence rates normally increase between one month and the next. The reduced VAT may be fully passed on yet the rate paid still increase but by less than it would have without the VAT reduction.

Taxi Drivers

SBWife wrote: »

The reduction didn't happen in a vacuum the costs of other inputs and demand conditions where also changing during the time period.

Eg. accommodation services: June is still shoulder season while July is high season hence rates normally increase between one month and the next. The reduced VAT may be fully passed on yet the rate paid still increase but by less than it would have without the VAT reduction.

In July 2010, accommodation services rose by 2.0% on the month. This July the rise was 0.9%. The increase this year was lower but the VAT rate reduction would have required a much larger difference, in fact there should have been a reduction.

Here is a table of the July monthly inflation rates for accommodation services back to 2003.

2003M072004M072005M072006M072007M072008M072009M072010M072011M07Accommodation services0.02.80.21.82.6-0.3-3.22.00.9

The average from 2003 to 2010 was +0.7%. The increase this year of 0.9% (when there was a reduction in VAT) was above that average!

lost815

Personally I don't mind, the small amount of Vat I would save would probably not mean much to me but to the business who is recouping the extra it might pay an extra bill when it's all added up.

I accept that not everyone would feel like that but that's just my opinion.
I'm sick of seeing small businesses close.

later12

It's a little mixed although there are strong indications that the vat decrease has not, so far, been passed along in a straight and honest fashion. This list is not a complete list, but cinemas, hairdressing salons and newspapers are indeed down, but not perhaps by as much as one might like.





The onus is on the consumer at this stage to protest with their wallets, and to take their custom, where they see fit, to establishments which have passed on the Vat decrease - even if just partially.

WalterMitty

The extra income from vat may only mean making a small profit rather than a loss for most businesses. It annoys me when you hear politicians on radio saying its disgracefull that the vat reduction hasnt been passed on without knowing the full costs faced in individual industries , gross profits/losses, margins etc.

Just because its not passed on to consumer doesnt mean it is not doing economy any good, it may keep more employed and in business than otherwise woulld have been the case.

The same politicians who complain about it ignore the fact that the greates costs for businesses are in their control, rates,rents(upward only ,nama etc) waste, water,min wages , electricity etc

later12

WalterMitty wrote: »

The extra income from vat may only mean making a small profit rather than a loss for most businesses. It annoys me when you hear politicians on radio saying its disgracefull that the vat reduction hasnt been passed on without knowing the full costs faced in individual industries , gross profits/losses, margins etc.

Just because its not passed on to consumer doesnt mean it is not doing economy any good, it may keep more employed and in business than otherwise woulld have been the case.

The same politicians who complain about it ignore the fact that the greates costs for businesses are in their control, rates,rents(upward only ,nama etc) waste, water,min wages , electricity etc

But the aim of the vat reduction was to boost consumer spending by distributing the tax cut, not to provide a blanket shelter for inefficiencies by nudging them closer into the black without benefitting consumers directly - in that latter case, you're just asking consumers to subsidize and protect certain businesses and certain costs. The aim ought to be to promote efficiency.

the groutch

ironic thing is that alot of the "cultural admittances" would be state-owned

Taxi Drivers

the groutch wrote: »

ironic thing is that alot of the "cultural admittances" would be state-owned

The prices of cultural admittances and sports participation are not surveyed in July. Notice how the monthly July inflation for these categories is zero for all years back to 2003 in the table provided by later10 above. These prices are surveyed quarterly so it will be a month or two before these price effects feed into the CPI.

The other categories are all surveyed monthly though!

El Soarab

Dont forget there is a raft of impending austerity measures coming up in the next budget. People are probably just bracing themselves for that

leeroybrown

It's simple. If the decreases haven't been passed on for the most part then they should be removed again. Sure businesses have cost issues but the intent of these reductions was to stimulate demand not to prop up unviable businesses through subvention.

Chris_5339762

Is anyone even the least bit surprised about this?

WalterMitty

later10 wrote: »

But the aim of the vat reduction was to boost consumer spending by distributing the tax cut, not to provide a blanket shelter for inefficiencies by nudging them closer into the black without benefitting consumers directly - in that latter case, you're just asking consumers to subsidize and protect certain businesses and certain costs. The aim ought to be to promote efficiency.

Oh i agree, this reduction probably just keep less efficent firms in business longer but untill serious reduction can be passed on by efficient firms consumers arent gonna spend much. The gov through its direct and indirect effects on cost of doing business are preventing firmsbecoming more efficnet and lower cost to customer.

waster81

WalterMitty wrote: »

Oh i agree, this reduction probably just keep less efficent firms in business longer but untill serious reduction can be passed on by efficient firms consumers arent gonna spend much. The gov through its direct and indirect effects on cost of doing business are preventing firmsbecoming more efficnet and lower cost to customer.

by your logic reducing costs will only keep more less efficient firms in business

pull the other one the vat reduction like the reduction in jlc has nothing got to do with creating more jobs etc its pure and simple a profit making exercise

yeah its the governments fault as usual!

Business good government bad

WalterMitty

waster81 wrote: »

by your logic reducing costs will only keep more less efficient firms in business

pull the other one the vat reduction like the reduction in jlc has nothing got to do with creating more jobs etc its pure and simple a profit making exercise

yeah its the governments fault as usual!

Business good government bad

No. Reducing costs controlled/influenced by government reduces costs to all firms. The more efficient ones then do a better job of controlling the other costs they face or of being more productive making a greater margin/net profit than the inefficent firm who may be just breaking even or making a relative small profit compared to its more efficent/productive competitor.
its a highly competive market out there in all those sectors impacted by vat reduction, a firm wont pass on reduced tax/cost in a highly competive market only if passing it on would mean a loss or greater losses.

Inverse to the power of one!

leeroybrown wrote: »

It's simple. If the decreases haven't been passed on for the most part then they should be removed again. Sure businesses have cost issues but the intent of these reductions was to stimulate demand not to prop up unviable businesses through subvention.

Your obviously not a student of the Irish school of economics.

Sadly I wish this were humorous, but Ireland is the land of the gouger and the begrudger. What might appear rational elsewhere will be bent to personal greed and cynicism in Ireland.

And yet the market(read citizens) accepts this behavior with out protest or correction.

Panrich

VAT is not an optional payment. How can businesses be let get away with charging pre-change prices?

SBWife

Panrich wrote: »

VAT is not an optional payment. How can businesses be let get away with charging pre-change prices?

There's nothing illegal with changing the net price so that the new net price plus the reduced VAT rate is equal to the previous net price with the higher VAT rate. The announcement of the change just said it was designed to support employment and would be reviewed at the end of 2012.

leeroybrown

Panrich wrote: »

VAT is not an optional payment. How can businesses be let get away with charging pre-change prices?

Businesses are (for the most part) free to increase or decrease their prices as they wish. This VAT decrease was intended to be passed on so if businesses aren't keeping with the "spirit" of the reduction the Government should remove it again.

thebman

I'm starting to see why America doesn't display prices including sales tax...

Tora Bora

leeroybrown wrote: »

Businesses are (for the most part) free to increase or decrease their prices as they wish. This VAT decrease was intended to be passed on so if businesses aren't keeping with the "spirit" of the reduction the Government should remove it again.

The government was elected, to a large degree based on certain promises made as part of their economic agenda.
Remember "no more income tax increases", etc, etc, blah, blah, blah.

Well the government's actions have not been in keeping with the "spirit" of the agreememt made with the Irish people.

How in such circumstances, can they pontificate at businesses not keeping with the "spirit" of the VAT reduction scheme.

SBWife

Tora Bora wrote: »

How in such circumstances, can they pontificate at businesses not keeping with the "spirit" of the VAT reduction scheme.

Last I checked they were politicians and can pontificate about anything that strikes their fancy.

leeroybrown

Tora Bora wrote: »

How in such circumstances, can they pontificate at businesses not keeping with the "spirit" of the VAT reduction scheme.

Double standards are a core value of Irish politics.