VAT Update

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Andrew-TNNG
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VAT Update

Post by Andrew-TNNG » Wed Mar 14, 2018 1:05 pm

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
Last edited by imanickam on Thu Mar 15, 2018 5:09 am, edited 1 time in total.
Reason: Moved the topic from the forum Extensions for Joomla! 3.x to the forum The Lounge

gws
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Re: VAT Update

Post by gws » Wed Mar 14, 2018 5:11 pm

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

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sozzled
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Re: VAT Update

Post by sozzled » Wed Mar 14, 2018 9:06 pm

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%)
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