Letter: VAT clarity please

May I ask that the media cease to collude with the government in perpetuating the misinformation that VAT has increased by 2.5 per cent?

A headline "VAT increases by more than 14 per cent" may concentrate the mind more fully on the true situation.

To illustrate: an item costs 100 before VAT. Last year VAT would cost 17.50 on that item. This year VAT costs 20 on the same item so the increase in VAT is 2.50. An item costs 500 before VAT. Last year VAT would cost 87.50. This year VAT costs 100. Vat has increased by 12.50.

An item costs 1,000 before VAT. Last year VAT would cost 175. This year VAT costs 200. Vat has increased by 25.

In every case the percentage increase can be calculated by finding out what percentage of the original figure the additional amount is by the following method. 2.50 as a percentage of 17.50 can be found by dividing the smaller number by the higher number and multiplying by 100. So, 2.5/17.5 x 100 = 14.285714285. For the 500 item, 12.50 as a percentage of 87.50 (12.5/87.5 x 100) = 14.285714285, and so on.

The increase in the amount of VAT being paid can therefore be seen to be 14.285714285 per cent by raising the taxation rate by 2.5 points - not per cent.

Don't let them off with it.

Donald Wright

Ben Sayers Park

North Berwick, East Lothian

This week's increase to 20 per cent on VAT will be a test of consumers' confidence for the coming year as budgets will be much tighter as a result. The additional charges on fuel are particularly uwelcome on top of the increases in fuel costs, which will undoubtedly add a further few points to the inflation figures.

This may lead to a hike in interest rates, which could scupper the government's economic plans, making the highly expensive quantitative easing plan seem like a wasted paper exercise. Could be a tough year.

Dennis Grattan

Mugiemoss Road

Bucksburn, Aberdeen