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December 30, 2009

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Tesco to keep VAT at 15%

TESCO, Britain's biggest retailer, is to freeze value added tax on thousands of products in the new year.

It pledged to keep VAT at 15 percent on items including TVs, iPods, toys and bikes, resulting in 12 million pounds (US$19.2 million) of savings for customers.

The duration of the freeze will vary between stores, Tesco added.

Britain cut VAT by 2.5 percent last December to cushion shoppers from the pain of the recession but will return the tax to its former 17.5 percent from January 1.

Earlier this month, Tesco's Finance Director Laurie McIlwee said that reversing last year's VAT cut would not derail recovery but any further increase would be a strain for shoppers.

A survey published on Monday showed British retailers believed 2010 would continue to be tough but not be worse than 2009.

Bellwether retailer John Lewis reported a strong online start to its seasonal clearance sale this week, adding to signs shoppers might be out in force ahead of the VAT rise.


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