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Tesco, Britain's biggest retailer, said it would freeze value added tax (VAT) on thousands of products in the new year. The retailer pledged to keep VAT at 15 percent on items including TVs, iPods, toys and bikes, resulting in 12 million pounds ($19.2 million) of savings for customers. The duration of the VAT 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 rate of 17.5 percent from January 1.
Earlier in December, Tesco's Finance Director Laurie McIlwee told Reuters reversing last year's cut in VAT would not derail the consumer recovery but any further increase would be a strain for shoppers. A survey showed British retailers overwhelmingly believe 2010 will continue to be tough but will not be worse than 2009.
Bellwether British retailer John Lewis reported a strong online start to its seasonal clearance sale, adding to signs shoppers might be out in force ahead of the impending VAT rise.

Copyright Reuters, 2010

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