Big grocers to hold off on VAT hike

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The Independent Online

Tesco, Asda, Sainsbury's and Morrisons have promised to hold off increasing value added tax (VAT) by 2.5 per cent on many non-food products from Friday, in a bid to boost trading early in the New Year. Tesco said it would save customers £12m by freezing VAT at the current rate of 15 per cent on products, including TVs, iPods, toys and bikes, until the end of January, as well as on thousands of other non-food lines on promotion until the offer ends.

In addition to the big grocers, store groups including John Lewis, Argos, Majestic Wine and Arcadia Group’s Topshop and Topman will hold back on lifting VAT to 17.5 per cent from this Friday. Retailers are keen to sustain a buoyant start to the post-Christmas clearance sales, although retail experts believe that consumers have brought forward purchases and the spending surge could fizzle out from 1 January 2010.

Richard Brasher, Tesco’s commercial director, said: “The VAT reduction was a welcome relief for millions of shoppers and helped many continue to treat themselves over Christmas. We want to extend this help in to the New Year and hope that by freezing VAT on thousands of products consumers will feel able to bag a bargain and get 2010 off to a great start.”

Tesco said the VAT savings were in addition to the £170m off prices it is offering customers in its Boxing Day sale.

Meanwhile, its big three rivals also made VAT price promises. Asda said it was will not increase prices on “half of VAT-able products”, including its entire George clothing offer, on 1 January. Sainsbury’s said it would not raise its prices on an extensive range of non-food products, including its Tu clothing, homeware, electricals, CDs and DVDs, as well as hundreds of items on promotion in stores and online. Gwyn Burr, Sainsbury’s customer director, said: “The good news for customers is they are able to continue to enjoy the January sales period.”

A Morrisons spokesperson comments, “To help our customers in January, we will freeze VAT on thousands of our home and leisure products until 1 February 2010.”

Separately, Asda said it had enjoyed its busiest ever of trading on 23 December. In the seven days up to Christmas, 12 of Asda’s stores delivered sales of more than £4m, with Boldon in the North East being its best performing store.