Will VAT reduction affect broadband prices?

Tuesday, November 25th 2008

VAT reduction has been announced in the UK on 24th November. It will be hard to foretell what impact the VAT reduction will bring on the broadband prices. On the other hand if there was a rise from 17.5% to 20%, then surely there would have been a hike in the prices. There are chances that broadband providers will plainly take their cues from other areas in the retail market when trying to make up their minds whether to pass on the diminution.

It is to be noted that the drop in VAT is only temporary and will last for only 13 months before rising again from 15% to 17.5%. The impermanent slash is just around 50p per month on a £20 broadband subscription.

Now, all may doubt on how a provider will be pricing its products. Those who list and do all their accountings based on a plus VAT basis will probably pass the saving on. Those who market at the consumer sector where VAT is inclusive scarcely justifies a mention in the pricing are expected to hold on to the 2.5% reduction in VAT.

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