eBay have surveyed sellers regarding the VAT increase to 20% due in January 2011. The big questions facing sellers are will the VAT rise impact sales and will it be passed on to customers or will sellers absorb the increase themselves.
Based on the feedback from 600 top sellers 63% are intending to absorb some or all of the VAT increase, with almost a quarter of sellers indicating that they’ll absorb the full increase. The bigger issue is that the same number 63% are concerned that the VAT rise will harm the economy by decreasing demand with half of all sellers believing it will directly impact their own business.
28% of sellers are concerned that the VAT increase will not only affect consumer demand but will also directly impact the profitability of their own business although 55% believed it will make no difference to profit margins.
It’s important to realise that for many sellers the VAT impact to their business will not be the full 2.5% headline increase as many VAT registered sellers can reclaim VAT on purchases. However for non-VAT registered sellers or those that can’t reclaim VAT it will make purchasing stock more expensive.
How will you handle the VAT increase? Do you think it will affect sales and will you increase prices or absorb the increase? Are you expecting your overall profit margins to rise or fall and do you think it will impact your sales?