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Fiscal fiasco: Small retailers bear the weight of the PBR

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“Darling’s statement that his cut in VAT is a ‘deliberate decision to support people and businesses through these difficult times’ demonstrates the government has not thought this through,” says Edjelbaum.

“We would all welcome a ‘fiscal stimulus’ package to ensure that the recession is shorter and shallower than predicted. But what this package has created is extra work and an administrative nightmare for small businesses just before Christmas and ahead of the 31 January tax deadline.”

Edjelbaum points to the immense hurdles now faced by small VAT-registered retailers who try to pass the full impact of the reduction in VAT on to customers. “They have until Monday morning to recalculate all of their prices, re-label stock, adjust their tills, amend their websites and organise reprinting of their catalogues.

“Next, they’ll have to decide what to do with mail order purchases in the pipeline and it’s bound to be too late for them to change their advertising. It’s doubtful whether they’ll see any change in business levels (if you don’t want to spend £117.50, is a reduction to £115 really going to change your mind?) and when they finally get to sit down, they’ll realise they have to adjust their accounting systems. That’s probably £500-£1,000 of unpaid labour!”

Edjelbaum has hit the nail on the head. Newspapers today are full of the woes of British retailers. M&S chief executive Sir Stuart Rose has admitted that the task of reducing the price of hundreds of thousands of stock will be “very difficult to execute”. “Are retailers committed to supporting this cut? Absolutely. Is it going to be a logistical nightmare? Yes.”

Mary Broughton, who heads up family-run veterinary medicine firm Dorwest Herbs, complains in The Times that, “Our customers will expect us to pass it on. We would have an awful lot of people ringing up to complain if we didn’t. But we won’t get any benefit.”

Related articles:"Darling has not stinted SMEs," says MandelsonEntrepreneurs react to Darling’s VAT changesEntrepreneurs doubt small firms will pass on VAT cut

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