An upcoming increase in sales tax in the UK will not be passed on to gamers, say major retailers.
UK game retailers are going to see their profits drop in January, as they bear the brunt of an increase in VAT. Senior figures in UK retail say that they are reluctant to increase prices past the normal £39.99 price point for fear of driving customers away.
The 2.5% increase, which takes the rate of VAT to 20%, was announced as part of the emergency budget outlined by new chancellor George Osborne last week, and Kim Bayley, director general of the Entertainment Retailers Association, believes it could be disastrous for retailers going forward.
“This is a big increase which is bound to have an impact on retail,” she said. “Government action often produces unintended consequences and if the result of this rise was to lead to more closures and interfere with the ecology of entertainment retailing, no one should be surprised if there is an outcry.”
It seems likely that this tax increase, and the corresponding loss of profits will result in an even greater focus on pre-owned game sales. Pre-owned sales were already more profitable for retailers than new games, and with margins getting even smaller, emphasizing this part of their business seems inevitable.