Will 2.5% reduction in VAT kick start the economy?
I just can’t see that it will. Robert Peston has been out and about getting feedback from retailers who have been very negative about it. See his post here.
I am no great economist, however, if I had to make the call I would treat the challenge like a marketing campaign.
When you launch a new product, the key is to get momentum. If your budget is limited, which they always are, you usually focus all of your marketing around a tightly defined target audience which will get the most benefit from the product and talk about it the most. The aim is then to get that group to tell their friends/colleagues/family and, possibly, pass on the benefit to them.
A 2.5% reduction in VAT looks like the opposite strategy. Targeting everyone, nobody benefits much, little passed on and no momentum. I am sure there could have been a more effective approach. Very frustrating.
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Tags: Business and Economy, Robert Peston, Value added tax, VAT