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While I think reducing VAT on basic things is a good idea, sadly this won't have any impact. Why? It already happened before here. When someone sells something
by Darmody 4y ago
While I think reducing VAT on basic things is a good idea, sadly this won't have any impact.
Why? It already happened before here. When someone sells something for, say, 1€ and then with the VAT reduction it should sell for 0.95€, they won't change prices which translates to more benefit. Why would they? Also they always can claim they did take in account the reduced VAT but their costs have increased and so their prices.
- zarzavat 4y agoStickiness works in both directions. Even if stores don't reduce their prices, having extra profitability will decrease upward pressure on prices.
- deleted 4y ago[deleted]
- saurik 4y agoYeah so to me the key problem is that it is just for six months. In the long term, you definitely will see someone take advantage of that margin reduction to price compete you down, but over six months there is no way market mechanics are going to cause the price to suddenly drop. Also, it is key that a VAT is collected behind the scenes. With a sales tax, the change at least could be immediate, as the money is individually itemized at the point of sale to the customer, and it would take time to raise prices to somehow compensate for the mess. ...but, with a VAT? This makes no sense: the food likely already had VAT charges added to it months ago during the various stages of it being produced. Apparently this was a big controversy in Turkey, where stores noted their inventory had already been purchased with some high VAT and it wasn't like anyone was going to give them a refund. https://www.duvarenglish.com/amp/market-and-grocery-store-owners-irked-by-governments-reduction-of-vat-news-60374 https://www.duvarenglish.com/amp/market-and-grocery-store-ow...