New VAT Rate – why not to pass it on…

July 1st – new vat rate of 9% on a broad selection of  of services connected to the hospitality and tourism sectors. The rate drops from 13.5% to 9% as part of the Jobs Initiative and the Government hopes it will help to stimulate the struggling sectors.

There is pressure on businesses to pass this reduction immediately on to the customer. I’m suggesting that businesses should hold on to this saving and use it to grow their business as follows:

  1. It will give them an opportunity to improve service levels which will improve business.
  2. It will give businesses an opportunity to reduce debt
  3. It will give businesses an opportunity to invest more in marketing
  4. It will give businesses an opportunity to invest more in training
  5. It will give business an opportunity to gain a firmer footing – too many businesses are on the brink.

Passing on price reductions to the consumer is populist and while it would be better to be for the consumer to buy cheaper – it would be better long term if businesses stay in operation in a profitable way – It has to be ok for businesses to make a profit. Its not a crime and for too many years now, some businesses have not been in a position to do this.