Wetherspoon chairman Tim Martin has penned an open letter calling for VAT and tax equality for the licensed trade ahead of tomorrow's Autumn Statement, saying that unfair costs are 'killing pubs'.
In the letter Martin argues that any cuts in excise duty help supermarkets far more than the on-trade, as pubs still pay 'far more' in business rates and VAT than the off-trade.
According to Martin, information supplied by Dalton Philips, former CEO of Morrisons, indicates that supermarkets pay about 2% of their sales as business rates. Based on an average selling price for a pint in a supermarket of £1.00, excluding VAT, supermarkets pay business rates of about 2 pence per pint, he claims.
However, pubs are assessed for business rates at about 12% of sales. Assuming an average pub price for a pint of £3.60, including VAT, pubs pay about 18 pence per pint, he says.
'Once again, as a result of taxes, the pub trade will be forced to raise prices by far more than supermarkets in order to maintain the margins that are essential for any business,' says Martin.
'Pub rating assessments are about to increase nationally by an average of around 15% from April 2017, which works out at about 3.6 pence per pint. Adding on the same again for margin would result in about a 7 pence increase per pint for pub customers.
'On the other hand, if supermarket business rates increase by the same 15%, they will pay less than a third of one pence in additional tax. In contrast to pubs, an increase of a mere half a pence is likely to be enough to preserve supermarket margins.'
Martin has long been a campaigner for a reduction to the VAT rates paid on food and drink by hospitality businesses, despite having left campaign group VAT Club Jacques Borel in late 2015, citing a lack of support.
'The pub industry is always competing with one arm tied behind its back,' adds Martin. 'Pubs pay 20% VAT on food sales whereas supermarkets pay almost nothing – an identical sandwich bought in pub attracts 20% tax in a pub and nothing in a supermarket.
'This allows supermarkets to sell food for less, and to subsidise the selling price of alcoholic drink sales. The playing field is anything but level. If the pub industry is to survive and thrive in the future, equality of taxes with supermarkets is vital.'