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### VAT Update

Posted: **Wed Mar 14, 2018 1:05 pm**

by **Andrew-TNNG**

Hi there,

We would like to increase our VAT from 14% to 15%.

How is this possible without affecting all of our products prices?

Thank you.

Andrew

### Re: VAT Update

Posted: **Wed Mar 14, 2018 5:11 pm**

by **gws**

Well if you increase VAT it must increase prices,£100 + 14% = £114 / £100 +15% = £115 ?

### Re: VAT Update

Posted: **Wed Mar 14, 2018 9:06 pm**

by **sozzled**

It's arithmetically impossible to increase the VAT on something that used a lower VAT rate beforehand and arrive at the same cost to the purchaser without first **discounting** the product unit price.

Assume that the unit cost of a product is *p* units (dollars, pounds, euros or whatever) and the cost to the consumer after adding 14% VAT is *y*, then for *y* to remain the same after "increasing" the VAT by 1%, *p* needs to be discounted. In this case, the discount factor is *approximately* .85%.

Another way of computing *y* (the cost to the purchaser) it to apply the formula

(*p* * .9915) * 1.15

That is, take *p*, reduce its cost by .85% and then add 15% VAT. The result is approximately correct (to within a couple of decimal places).

Example:

let *p* = 50 and VAT = 14%: 50 + 14% = 57 (therefore *y* = 57)

if VAT is 15% then *p* will need to be 49.575 (i.e. 50 * .9915). Therefore 49.575 + 15% = 57.01 (which is pretty close to the same *y* when VAT was 14%)