At the budget in March, the industry’s attention was understandably focused on two very big tax issues which affect us all – beer duty and business rates.
Both are a huge burden on our industry and hit brewing and pubs in a way which is particularly unfair.
Beer duty in Britain is three times the European Union average; when it comes to business rates, pubs are overpaying by around £500m every year. However, on the subject of taxation, there are other major issues holding the sector back – and by far the biggest is value-added tax.
When someone buys a meal to take home in a supermarket, they pay no VAT at all, but when they are in the pub, VAT is charged at 20%, adding pounds to the cost of eating out.
Not only is this unfair on our customers, but it’s a huge burden on the industry and it’s also very bad for the economy. Eating out has been a huge creator of new jobs in recent years. Yet the whole hospitality sector could create many more, if we had a fairer system of VAT. Research carried out for us at the British Beer & Pub Association shows that even a relatively small drop in the rate of VAT – to 15% for eating out – would lead to the creation of an additional 78,000 jobs. As the leading segment in the eating-out sector, many of these new jobs would be in pubs. Many of our neighbouring countries have recognised this job-creating potential and have slashed the rate of VAT on eating out.
To give just a few examples, Ireland has a 9% reduced rate and Finland has a 14% reduced rate for food in restaurants, while the Netherlands has a very low rate of just 6% in restaurants (excluding alcohol). As we move towards Brexit, we will need to look at all aspects of our tax system to keep us competitive – so we should certainly take action on VAT. We need a tax system which encourages job creators and entrepreneurs to invest in our pubs – and a lower rate of VAT is one major way of making a big difference.
This is why it is so important that the whole industry get behind Tax Equality Day on 20 September.
We’ve already seen some great publicity, with Tim Martin and Wetherspoon getting behind the campaign – and I hope that others will do the same. It is true that lowering VAT on pub and restaurant meals would be a major change of policy for the Treasury, and I don’t underestimate the challenge in persuading them of its merits. Yet this is why we need to show the government that it needs to focus far more on this issue and make it a priority. I hope everyone in the industry will find ways to support Tax Equality Day and publicly back the campaign.
Brigid Simmonds, Chief Executive of the British Beer & Pub Association l This article first appeared in Eat Out online