.png)
.png)
The announcement in the PBR that VAT will be temporarily cut to 15% from 1 December 2008 until 31 December 2009 has been greeted by much doubt from within the tax sector.
Andrew Jupp, head of tax, Tenon
'I wonder whether it will really boost consumer spending which is what the Chancellor hopes will happen. The recent high street sales have failed to have an impact, so I think it unlikely that a small reduction in VAT will do much to boost consumer spending.'
Mike Lambourne, VAT partner, Ernst & Young
The Chancellor will be relying on retailers to immediately pass on these cuts to their customers - but, given the need for computer systems to be changed, this may well be wishful thinking. This might give a particular boost to internet shopping who can change prices without re-ticketing all items.'
Debbie Jennings, VAT director, PKF
'On the business front, those that are unable to reclaim their VAT, such as banks and insurers, will benefit directly from the cut as their operating expenses will be reduced. Most other types of business will be unaffected financially, as it is a tax borne by the consumer, although they will incur the administrative costs of changing their systems and invoices to incorporate the new rate.'
Andrew Hubbard, deputy president, CIOT
'The CIOT had previously commented that VAT is one tax measure that is quick to introduce and was a likely candidate for use if the Government wished to embark on a fiscal stimulus. Whether it achieves its aim depends in a large part on the response by businesses and consumers. They have no legal obligation on them to pass on the benefits of the VAT cut to consumers, whether in whole or part of a rate reduction.'
Marc Welby, VAT partner, BDO Stoy Hayward
'A drop in the VAT rate will have no enduring benefit for customers. It may give a small fillip in the run up to Christmas, but it won't persuade consumers to spend more than they would otherwise have done before the PBR - and with the increase in alcohol duty it won't even allow consumers to buy more Christmas cheer. The Chancellor has given with one hand and taken away with the other.'
Chas Roy-Chowdhury, head of taxation, ACCA
'The hope is that this will kick start high street spending, but business needs to pass on the savings... The question is whether this is enough of a stimulus. Big and effective measures are needed. Will a year be enough? If not, this temporary reduction may need to be extended.'
Richard Lambert, director-general, CBI
'The fiscal stimulus through the cut in VAT has the advantage of immediacy but only time will tell whether it increases spending by individuals significantly.'
