How is e-commerce affected by the VAT cut?

The Chancellor yesterday anounced a cut in the rate of VAT from the current 17.5% to 15%, effective from Monday 1st December.

The intention is to stimulate consumer spending to help businesses but, as Patrick at Blogstorm points out, this could turn out to be a major problem for some online retailers.

The savings are minimal for consumers; just over £2 off a £100 purchase, but as many e-commerce systems will have the 17.5% rate 'hard wired' into them, changes could be difficult to implement before Monday, making some etailers' prices less competitive.

There is also the issue of updating banner ads which display prices and uploading them again to ad servers, another time consuming task for etailers.

To make matters worse for online retailers, Alistair Darling sneaked in a 2p hike in fuel duty to offset the VAT cut.

Online retailers, especially those seeking to attract customers with free delivery offers, are vulnerable to rising fuel costs so this hike, coupled with the possible problems in changing the VAT rates on websites, means that the pre-budget report is not necessarily good news for e-commerce.

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