The on-trade joined together yesterday to highlight the tax ‘burden’ faced by pubs and bars, as trade bodies and pub groups called for a VAT reduction to address the imbalance.
Tax Equality Day is intended to draw attention to how the on-trade is disproportionately hit by VAT, compared to other alcohol retailers. While food and drink in pubs is subject to 20% VAT, stores such as supermarkets are not required to pay VAT on their groceries, meaning the cost saving can be used to sell alcohol at a discounted rate.
As previously reported by Imbibe, Wetherspoons cut the price of all food and drink at its 900 pubs by 7.5% yesterday in support of the campaign, to demonstrate to customers the amount they would save if VAT in pubs was lowered permanently.
Kate Nicholls, CEO of the ALMR, said: ‘We know from past experience that a cut in VAT is the single most effective tool in staunching a consumer spending downturn in the face of rising inflation. In a week when Moody’s said rising costs and a softening of consumer confidence were resulting in an industry stress test, Tax Equality Day is a timely reminder of how much of that cost burden comes from tax and the boost which would come from targeted tax cuts.
‘Our latest Benchmarking Report shows that the Chancellor’s decision to significantly increase pub taxes – business rates and alcohol duty – together with rising labour costs has pushed the amount the average pub pays in tax to just under 40%. That threatens investment in jobs, growth and communities and jeopardises the sector’s record of generating 1 in 6 new jobs at a time when we can ill afford it.’
Meanwhile, BBPA chief executive Brigid Simmonds said that tax disparity was making pubs uncompetitive, and called on the government to take action. ‘If you buy a meal in a supermarket there is no VAT, but in the pub, you pay 20 per cent,’ she said.
‘Even a small drop in the VAT rate for eating out, to 15 per cent, would create 78,000 jobs, and would be a big boost for the economy. Lots of our competitor countries have taken action on VAT in the hospitality sector, and Britain should, too. When you add in business rates, and the huge rises we have seen in beer duty in the past decade, it all makes for an unsustainable tax burden on our pubs,’ Simmonds added.