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Supermarkets promise shoppers they won't have to pay VAT hike

SHOPPERS got an early boost ahead of the new year as a number of major supermarkets announced they will not pass on the VAT hike in January.

Tesco, Aldi, Lidl and Marks & Spencer have all said they will not ask shoppers to pay the top-rate VAT rise from 21pc to 23pc, announced by Finance Minister Michael Noonan in last week's Budget.

Discount retailer Dealz and opticians Specsavers also said they would not pass on the VAT increase.

The move is good news for shoppers but it could be difficult for smaller retailers to match.

However, some prices will still rise in January, as some retailers are only freezing the VAT rate for specific types of items.

Tesco last night said it would not pass on the new 23pc VAT rate to food or clothing, but the increased rate would apply to non-food groceries such as washing powder and to household goods.

Most food products are zero-rated for VAT or taxed at the lower 13.5pc rate, but luxury products such as chocolate, crisps, soft drinks and bottled water are charged at the higher rate.

Meanwhile, Lidl Ireland took out ads stating: "New Year VAT Hike? Not at Lidl". The discount retailer said in a statement that its prices on all products on December 31 would not change as a result of the 2pc increase in VAT.

"Therefore, when Lidl stores reopen on January 2, customers can enjoy the same prices as before," it said.

Aldi said it had been been the first to give a commitment not to pass on the VAT increase to consumers.

"The company will absorb the 2pc increase on all grocery lines available in store every day from Aldi's 90 stores in the Republic of Ireland," said a statement.

A spokesperson confirmed that the VAT freeze would apply to all groceries in their stores -- including alcohol and non-food items such as cleaning products.

Marks & Spencer announced last week that it would not pass on the VAT hike.

"Prices across fashion, furniture, beauty and home will remain unchanged and as competitive as ever," the British chain said.

The decision to freeze prices at many chains is good news for consumers but will further squeeze retailers' margins.

This will impact most on smaller stores, said Retail Excellence Ireland chief executive David Fitzsimons last night.

Most clothes would remain at the old 21pc rate until new season stock was brought in later in the year, but no retailers could guarantee to hold prices indefinitely, he said.

Dunnes Stores did not comment last night on whether it would pass the VAT increase on to customers.

Irish Independent