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Supermarkets to pass on VAT cut but others need it to stay afloat

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Lidl’s John Paul Scally. Picture: Damien Eagers

Lidl’s John Paul Scally. Picture: Damien Eagers

Lidl’s John Paul Scally. Picture: Damien Eagers

Supermarket chains Lidl and Aldi have vowed to pass the temporary 2pc cut in VAT rates onto their customers from next month.

The Government announced that it will cut the current 23pc VAT rate to 21pc from September to February as part of its July stimulus plan, announced on Thursday, to help kickstart the economy.

And while the higher band of tax is not applicable to staple food purchases - excluding sweets, and high-fat and high-sugar items like ice cream and fizzy drinks - the reduction in tax will apply to all items taxed at the higher rate, the supermarkets announced.

They include such items as homewares, gardening and DIY supplies that both supermarkets sell in their so-called 'middle aisles' as special offers.

The tax was raised from 21pc to 23pc by former finance minister Michael Noonan at the height of the last recession in 2011. At the time, some leading grocery chains, including Tesco, Aldi, Lidl and Marks & Spencer announced they would not charge their customers the higher rate.

Yesterday, Lidl Ireland claimed it was the first retailer in Ireland to announce that it would pass the tax savings directly onto the consumer.

Lidl Ireland's chief executive John Paul Scally said: "Passing on the VAT reduction savings to our customers from the earlier date of August 1 means we're proudly putting even more money back in our customers' pockets."

Not to be outdone, its rival Aldi said it will also pass on the tax savings from August 1, even though the tax cut doesn't officially kick in until September.

"We're not waiting for that and are pleased to confirm that Aldi Ireland will be passing on this VAT reduction to our customers on all affected products from August 1. This is in keeping with our commitment to customers that we will never be beaten on price," said John Curtin, the company's group buying director.

But consumers should not hold their collective breath expecting to see across-the-board price drops in other areas, according to Retail Excellence, a trade association representing both large and small retailers in Ireland.

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Retailers, especially those selling clothes, saw a 30pc reduction in sales during the second quarter of the year due to the lockdown, said managing director Duncan Graham.

As a result, many will use the tax drop in order to help offset some of their losses, he told the Irish Independent.

"Some will pass it on, others won't," he said. "I think most retailers will use it to stay afloat."

However, he said the cut is "better than nothing".

Neil McDonnell, CEO of the Irish Small and Medium Firms Association (ISME), agreed.

"Every little helps and we still welcome it.

"But I don't think it will assist non-essential retailers. It's temporary and it's small," he said.


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