SKY TV Package charges - VAT increase

Legacy_user

On the 4th January 2010 the VAT rate is increasing by 2.5% from 17.5% to 20%

So, why are SKY increasing the majority of their charges by nearer to approx. 3% ?

Is this a typical rip off hidden behind a change in the VAT rate ?
Do SKY think customers cannot do a bit of simple maths to check what they are doing ?

mlp

Well, the basic 2-mix subscription has gone from £15 to £20 in three years - that's a 33% increase!

pen1

BAA1 wrote: »

So, why are SKY increasing the majority of their charges by nearer to approx. 3% ?

Some of the lower-cost packages/services are rounded up. However, it's equally true that many combinations (for example, 1 to 6 Entertainment Packs with Sky Sports Pack) are rounded down. Prices for adding Sky Movies Pack and ESPN are unchanged.

Some more information/discussion here:
http://www.digitalspy.co.uk/forums/showthread.php?t=1377508

I fully expect Sky to have covered the VAT increase, but don't think that there's clear evidence to suggest that they're abusing the VAT rate change.

Sky adopted the same approach of rounding prices in 2008, when the VAT rate dropped to 15%, and likewise when it subsequently returned to 17.5%.

System

pen1 wrote: »

....
I fully expect Sky to have covered the VAT increase, but don't think that there's clear evidence to suggest that they're abusing the VAT rate change.

I guess it all depends on the definition someone adopts for "abusing the VAT rate change"

For anyone like myself, who only have the basic entertainment package with no Sports or Movies, then in my opinion, I would say SKY are wrong to include an additional 0.5% increase under the cover of the VAT rate rise, especially when you consider that SKY have recently applied an increase to their charges anyway.
It should be fairly obvious that they only apply this rounding to the nearest 25p so that they can make more profit, not less.

This is a stealthy way of increasing their prices at the same time as the VAT rise.

pen1

BAA1 wrote: »

It should be fairly obvious that they only apply this rounding to the nearest 25p so that they can make more profit, not less.

As I stated, however, the impact for some customers has been rounded down. Whilst the prices for between 1 and 5 Entertainment Packs are rounded up by up to 10 pence, my combination of channels results in a net rounding down of 48 pence.

The nature of rounding, to keep prices simple, is that there are "winners" and "losers".

Pricing every option to exactly reflect the VAT change would create countless odd prices that neither customers or Sky customer service staff would remember. I think most retailers will continue to adopt convenient price points (e.g. £9.99, £10, £10.49, £10.50).

In the end, Sky have the right to choose their retail prices and subject to any terms & conditions, customers can choose whether to buy the products/services.

dobsoncrew

Apparently you have to multiply by 1.026 to the current price to get the true increase of 2.5% VAT. But many companie's will use this as a reason to increase prices anyway

mlp

dobsoncrew wrote: »

Apparently you have to multiply by 1.026 to the current price to get the true increase of 2.5% VAT. But many companie's will use this as a reason to increase prices anyway

Well, it's clearer if you take the 17.5% VAT off the price

(£20 / 1.175 = £17.0213)

And add 20% VAT on

(£17.0213 x 1.2 = £20.4255)

Which is a multiplier of 1.021