Cut in UK VAT means Macs cheaper for one year from next Monday

[RedTomato]

I agree, Apple will most probably put up the base cost, so that the final price is the same. This still satisfies the government's stated aims, in that companies will make more profit from the same sales and hopefully fewer of them will go bust.

Personally, I'm dubious about the overall impact of this - prices will stay the same, and as poor people spend a greater proportion of their income in VAT, (rich people invest in more things that aren't charged VAT), this means that a share of the VAT poor people pay is effectively taken from the government fund and put into companies.

To the person above, if the base cost goes up, if you return your mac asking for a refund, you might well get asked to pay more

 

[marbles]

Could one of you Apple guys ask someone what is going to happen please ?.

I'm still going ask my local councilor in the morning . totally shocking if this is not passed on . rip off Britain for sure and most the people commenting in this thread seem to be backing it !! , bizarre




rj

 

[bigandy]

2.5% may not sound like a lot, but it makes a difference. Plus, under silly EU laws, VAT can't drop below 15%.

I agree, Apple will most probably put up the base cost, so that the final price is the same. This still satisfies the government's stated aims, in that companies will make more profit from the same sales and hopefully fewer of them will go bust.

O RLY?

VAT to be cut from 17.5% to 15% from next Monday for 13 months. The chancellor urges retailers to pass it on as soon as they can.

sauce: http://news.bbc.co.uk/1/hi/uk_politics/7746188.stm

 

[neiltc13]

Personally, I'm dubious about the overall impact of this - prices will stay the same, and as poor people spend a greater proportion of their income in VAT, (rich people invest in more things that aren't charged VAT), this means that a share of the VAT poor people pay is effectively taken from the government fund and put into companies.

This is nonsense. People on lower incomes tend to spend LESS of their money on VATable items and more of it on food (VAT exempt) and fuel for their homes (reduced rate). Neither of these items will receive a cut from Monday. Further, public transport (which less well off people tend to use more than wealthier people) is also a zero VAT item. The rich plow a huge amount of money into the Treasury by paying VAT on their petrol for their cars.

 

[Poncho]

Funny thing is, reading one of the free London evening papers on the way home tonight it actually gave an iPod as one of the three examples of goods that would be cheaper post Monday...

 

[marbles]

Funny thing is, reading one of the free London evening papers on the way home tonight it actually gave an iPod as one of the three examples of goods that would be cheaper post Monday...

man that is funny

cheers ,

rj


To the guy about VAT & poor people ,


The best of times are usually those had without loads of money in the picture anyway .

My experience is that most on low income , tend to be the most generous.

It is almost Christmas and most I imagine will be spending a considerable of there low incomes on providing a great time for there family and this most definitely means items where VAT is charged .
So the 2.5 % reduction most certainly will bode for a happy festive time , more so for some than others .

rj

 

[Umbongo]

If you've considered it, I'm fairly sure he has too.

I used to think along those lines but to be honest they don't think about obvious things because most politicians in England don't live in the real world.

 

[ritzuk]

I think it would take pretty big brass balls for any company to charge at the "old" VAT rate and pocket the difference.

OK, I may be completely wrong about how VAT works, but I was under the impression that if VAT goes down 2.5%, then product prices will not automatically fall 2.5%. Could someone explain this? I was under the impression that:

When Apple imported the goods into the UK, they had to pay 17.5% duty as they were brought in outside of the EU.


For people who buy things into the UK AFTER the tax cut, then they will only have to pay 15%, saving 2.5% which they can then pass onto the public, if they want to. They may try and keep the money to compensate for lower sales.

But it'll be a long time before this trickles down to us, as they need to sell all their stock they paid 17.5% tax on.

Have I made an absolute hash of that?

 

[RedTomato]

This is nonsense. People on lower incomes tend to spend LESS of their money on VATable items and more of it on food (VAT exempt) and fuel for their homes (reduced rate). Neither of these items will receive a cut from Monday. Further, public transport (which less well off people tend to use more than wealthier people) is also a zero VAT item. The rich plow a huge amount of money into the Treasury by paying VAT on their petrol for their cars.

That's a debatable point. VAT is generally held to be a regressive tax (poor people pay more), but yeah some say it's progressive. Some say poor people spend a larger proportion of their income on booze and fags, both of which are massively taxed. And while rich people buy a lot of petrol, it's not a large fraction of their total spendings. I think investment schemes, mortgages, private pensions, employee payments etc aren't charged VAT.

The "value added tax" has been criticized as the burden of it relies on personal end-consumers of products and is therefore a regressive tax (the poor pay more, in comparison, than the rich). However, this calculation is derived when the tax paid is divided not by the tax base (the amount spent) but by income, which is argued to create an arbitrary relationship.

Make of that what you will.

O RLY?

Actually I agree with you. Politicians' stated aims are very often 180' from the real effects of their decisions.

 

[RedTomato]

OK, I may be completely wrong about how VAT works, but I was under the impression that if VAT goes down 2.5%, then product prices will not automatically fall 2.5%. Could someone explain this? I was under the impression that:

When Apple imported the goods into the UK, they had to pay 17.5% duty as they were brought in outside of the EU.


For people who buy things into the UK AFTER the tax cut, then they will only have to pay 15%, saving 2.5% which they can then pass onto the public, if they want to. They may try and keep the money to compensate for lower sales.

But it'll be a long time before this trickles down to us, as they need to sell all their stock they paid 17.5% tax on.

Have I made an absolute hash of that?

http://en.wikipedia.org/wiki/Value_added_tax is an interesting read.

Basically a company should pay VAT on the things it buys. The total amount of this cost = V(a).

This company also charges VAT on the things they sell. Call the total amount of this charge = V(b)

They send to the government the total: V(b) - V(a)

i.e the difference between the VAT on the (theoretically) cheaper raw materials and the VAT on the more expensive final product.

So if I make pots, and I am VAT registered, and I buy £100 of raw materials (clay, wood, coal, paint) and through my work, I create and sell £150 of pots, I have to make a VAT payment of:

(17.5% of £150) - (17.5% of 100) = £26.25 - £17.50 = £8.75

This is effectively 17.5% of £50, which is the value I added to the raw materials. There's a fair bit of paperwork and proofs of purchase involved, which is why some smaller companies don't bother to get VAT registered.

If Apple had to pay 17.5% to import a macbook, and assuming it was charged on the full value (which I honestly don't know about), kept the base price the same and charged 15% VAT on it when it was eventually sold, then they would pay -2.5% VAT, i.e. get a VAT refund of that extra 2.5% that they paid on import.

 

[ditzy]

Beg to differ, maybe? Under the terms I purchased the machine, I can return within 14 days for a full refund, no questions asked. If, when the 2.5% VAT reduction hits, it means the machine is now on Apple's shelves for less, I can "buy it again" for that lower price. Ergo, I can get a "refund" on that price difference.

You can return the item, and then buy another I suppose. But if you asked them for the 2.5% back you wouldn't get it.

 

[chappy87]

I was thinking about this as soon as I saw the news of this reported- will the saving make it down to the customers? Surely that is the stated aim of the reduction in VAT- to attempt to stimulate some demand within the economy. It's no good economy wise for importing companies to pocket the difference- they won't import more if they aren't going to sell any more!

However, as someone above me stated, the main issue here is that people will be spending a larger proportion of their money on food and fuel at this current time, neither of which will be affected by the VAT cut. It's not really like we're talking about dramatic price drops either- 1p on the price of a mars bar, £320-odd on a new Ford Focus.

What worries me most however is that the current tactic seems to be to encourage people to spend their way out of this recession- with what exactly?! Let's cut the interest rate to make borrowing cheaper, so people can stimulate the economy based on.... yes, you guessed it, credit. The world financial system needs complete reform. Bring back Bretton Woods, where there was at least some tie on how many dollars could be printed and thrown out around the world as American influence.

 

[3121]

i hope Apple do pass on the reduced VAT to us - I would be a bit tight they didn't.

 

[CalumC]

http://a248.e.akamai.net/7/248/8352/1154/store.apple.com/Catalog/uk/Images/vat_rate_change.html

I think that settles the argument.

 

[gnasher729]

Could one of you Apple guys ask someone what is going to happen please ?.

I'm still going ask my local councilor in the morning . totally shocking if this is not passed on . rip off Britain for sure and most the people commenting in this thread seem to be backing it !! , bizarre

1. Check out www.apple.com for a nice surprise if you order today (Friday).
2. Check out the link below for a chart which shows how the pound has changed against the US dollar in the last three months. Right now, Apple is subsidising Macs sold in Britain.

http://finance.yahoo.com/q/bc?s=GBPUSD=X&t=3m&l=on&z=m&q=l&c=

 

[marbles]

1. Check out www.apple.com for a nice surprise if you order today (Friday).
2. Check out the link below for a chart which shows how the pound has changed against the US dollar in the last three months. Right now, Apple is subsidising Macs sold in Britain.

http://finance.yahoo.com/q/bc?s=GBPUSD=X&t=3m&l=on&z=m&q=l&c=

thanks ,I'm a bit disappointed that the MacBook pro is not discounted .I'd read about the Friday sale on the front page and checked at the store online , no discount on MBP , ah well

Subsidizing Macs ?, sorry , I don't really understand . I hardly think they are subsidizing them,I'd thought Macs where made in China for a vast mark up ? . but I don't really understand ,please excuse my ignorance .could you explain .


cheers


rj

 

[pixelated]

But the point of the cut in VAT is to make goods and services cheaper so people will buy them.

why is this not obvious to everyone? Apple have to charge VAT which they give back to the government. why would they care how much it is? they make the same either way.

 

[Umbongo]

why is this not obvious to everyone? Apple have to charge VAT which they give back to the government. why would they care how much it is? they make the same either way.

Well most companies selling to consumers don't work out the price and then add VAT. They determine the price and pay the VAT proportion. So a change in VAT means changing advertising and labels and having odd pricing amounts. It shouldn't much matter to a web business, but for many brick and mortar stores it does. For example we aren't likely to see all the pound shops become 98p shops. Apple can do what they like as they have no requirement to change their prices other than goodwill.

 

[dwright1974]

thanks ,I'm a bit disappointed that the MacBook pro is not discounted .I'd read about the Friday sale on the front page and checked at the store online , no discount on MBP , ah well

Subsidizing Macs ?, sorry , I don't really understand . I hardly think they are subsidizing them,I'd thought Macs where made in China for a vast mark up ? . but I don't really understand ,please excuse my ignorance .could you explain .


cheers


rj

For those of you hoping to pick up a 'cheaper' MBP today, you might want to check out John Lewis. They have already reduced the VAT price on them so at the moment they're coming out £30 cheaper than Apple, and you get 2-years warranty as standard.

I picked up a MBP from them yesterday.

HTH

D

 

[Phil A.]

Well most companies selling to consumers don't work out the price and then add VAT. They determine the price and pay the VAT proportion. So a change in VAT means changing advertising and labels and having odd pricing amounts. It shouldn't much matter to a web business, but for many brick and mortar stores it does. For example we aren't likely to see all the pound shops become 98p shops. Apple can do what they like as they have no requirement to change their prices other than goodwill.

QFT - a lot of prices in the shops are things such as £9.99, £1.99, £1.00, etc, etc. In the UK, the price quoted to the consumer already includes VAT and other taxes (So what you see is what you pay). An item that costs £9.99 today would cost £9.78 with 15% VAT, but many shops will probably just leave the price as it is and pocket the extra vat exclusive amount themselves. Big ticket items will probably drop the total selling price, but smaller items will end up costing the consumer exactly the same. One good example raised about this was Poundland, which sells everything in store for £1.00 - I'd be very surprised if they suddenly became 98p land...

why is this not obvious to everyone? Apple have to charge VAT which they give back to the government. why would they care how much it is? they make the same either way.

Because if they leave the final price (which includes VAT) the same, the net price (i.e. the bit before VAT) increases with a decrease in the VAT rate.
For example, something which costs the consumer £235.00 today is made up of £35.00 VAT and £200 net income for the reseller. On monday, something which costs the consumer £235.00 will be made up of £204.35 for the retailer, and £30.65 in VAT for the Government. This means the retailer would make an extra £4.35 on the sale of that item on Monday if the price to the consumer remains the same.

To put it another way: If a company turns over £200m and keeps all their prices the same to the consumer they will make over £4m extra profit in the next 12 months...

 

[OllyW]

Apple have confirmed they are going to charge VAT at the new rate of 15% from Monday.

"From 00.00 on Monday December 1st the standard rate of Value Added Tax (VAT) in the UK will be reduced by the UK government from17.5% to 15%

All prices displayed on the Apple Online Store during our one-day shopping event are inclusive of VAT at the current rate of 17.5% but exclusive of delivery charges unless otherwise indicated.

If you order a Mac from the Apple Online Store during our one-day shopping event, the price displayed during the checkout process and in your Order Confirmation email will include VAT at the current rate of 17.5%. However, since your order will ship on or after Monday December 1, your order will be subject to VAT at the new rate of 15%.

If you order any additional items at the same time as your Mac, these items will be shipped together with your Mac as a single order, and will also be subject to VAT at the new rate of 15%."

 

[dwright1974]

Because if they leave the final price (which includes VAT) the same, the net price (i.e. the bit before VAT) increases with a decrease in the VAT rate.
For example, something which costs the consumer £235.00 today is made up of £35.00 VAT and £200 net income for the reseller. On monday, something which costs the consumer £235.00 will be made up of £204.35 for the retailer, and £30.65 in VAT for the Government. This means the retailer would make an extra £4.35 on the sale of that item on Monday if the price to the consumer remains the same.

To put it another way: If a company turns over £200m and keeps all their prices the same to the consumer they will make over £4m extra profit in the next 12 months...

I would be really surprised if not shocked if retailers did this, (though Woolworths could probably do with it at the moment!).

The point of the cut in VAT is not to help businesses, it's supposed to help kick start buying again in the shops. All it takes is for one retailer to drop their prices by the VAT cut and the others will have to do it.

If you were looking in Store A at a pair of 501's where they had cut the price, whereas in Store B they kept them the same price (and were in effect pocketing the 2.5%), where would you go for them?

People have said that there is a huge cost in relabelling everything. I don't think there necessarily is, it could be done at POS with 'ready-reckoners' up in the store - been to Debenhams/M&S/House of Fraser when they have their 20% days? Works fine then doesn't it?

The point is, I believe the stores will have to do this, (even though 2.5% is actually b****r all)!

As I said in my earlier post, I picked up a new MBP yesterday from John Lewis, and one of the reasons was because they had already knocked the VAT off ... I could have got it from Apple but £30 is better in my back pocket rather than Apple.

Just my 2.5%'s worth.

D

 

[eluk]

Apple have confirmed they are going to charge VAT at the new rate of 15% from Monday.

This is not surprising, although nothing leads me to think their prices will be reduced. Apple quote VAT inclusive prices and therefore the only change I envisage is the printing on the receipt 'includes Vat at 15%'.

 

[marbles]

This is not surprising, although nothing leads me to think their prices will be reduced. Apple quote VAT inclusive prices and therefore the only change I envisage is the printing on the receipt 'includes Vat at 15%'.

has anyone asked Apple directly ?

 

[gnasher729]

Subsidizing Macs ?, sorry , I don't really understand . I hardly think they are subsidizing them,I'd thought Macs where made in China for a vast mark up ? . but I don't really understand ,please excuse my ignorance .could you explain

Take the price from the US store in US dollars. Convert the price to British Pound at the current exchange rate. Add 17.5 percent for VAT. Compare to the price on the UK store. If both prices are exactly the same then Apple gets the same money. If the UK store price is lower than Apple gets less money from a Mac sold in the UK then from a Mac sold in the US. And that is the case right now.