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VAT Increase Scandal

By Dave Martin
4th January, 2011

What we are told is a VAT increase has turned out to be a non-mathematical price hike scandal issued by many commodity and service providers across the UK

A VAT increase should be a simple mathematical calculation. For example, something that once cost £100 including the VAT would have cost £85.11 at the 17.5% VAT rate.

The calculation is £100 divided by itself plus 17.5% - or – 100 / 1.175

To add the new VAT rate, the calculation is £85.11 multiplied by itself plus 20% - or – 85.11 X 1.2, which equals £102.13. A rise of £2.13 on the original £100.

So why is it that many businesses are unable to do the maths and have raised prices well beyond that of any VAT increase? For example, petrol stations that were charging £1.199 per litre are now charging £1.249 per litre – a 5p increase – double the VAT uplift.

Not only is this an immoral increase at a time when all of us are struggling, it could be argued that disguising such hikes as an increase in VAT duty is illegal. Clearly, the VAT increase is just a part of the overall increases we are seeing on the street. Any other price increases aside from VAT should have been made apparent either before or after the VAT increase to ensure that the highly regulated VAT element has been applied fairly and squarely.

The VAT regulators should vetting these increases and coming down hard on those who are not applying the mathematics. 

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