A month before higher value-added tax (VAT) rates take effect, retailers are scrambling to adjust their systems and ensure compliance. Former finance minister Malusi Gigaba last week announced an increase in VAT from 14% to 15%. The hike would be effective from April 1. In addition to the need for systems upgrades, retailers must contend with a number of complexities. One conundrum is whether to abandon psychological pricing points – or prices that are not whole numbers. For instance, a retailer may have to either absorb the VAT hike on a product priced at R99.99 or pass it on to consumers by raising the price to over R100. "I think retailers now have to consider whether they take the hit and keep those psychological barriers, how much are they worth, and [whether] they are even real," said Gareth Hawkey, CEO of enterprise retail software firm redPanda Software. But Daniel Isaacs, an analyst at 36One Asset Management, expects retailers to hang on to psychological pricing strategies....
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