Tax Equality Day will take place this year on 20 September with pubs, restaurants and bars across the UK temporarily lowering their prices to highlight the effect VAT has on the sector. This annual event draws in customers tempted by the promise of cheaper food and drink and shows, in the best way possible, the positive effects of a lower rate of VAT for hospitality businesses.
The ALMR has been leading the campaign for a reduced rate of VAT, a tax which is disproportionately hampering investment and growth in the eating and drinking out sector, particularly when compared with supermarkets.
Pubs and restaurants in the UK pay the standard 20% rate of VAT on their food and drink, whereas supermarkets do not. The enormous savings being made by supermarkets in this area allows them to sell, among other things, heavily discounted alcohol at very near the cost price in an exercise akin to loss leading. The eating and drinking out sector is the third largest private sector employer the UK, with pubs and restaurants generating £60bn, but it is at a major disadvantage when it comes to VAT.
Given the associated uproar that would likely follow such a move, it is incredibly unlikely that any government is going to begin applying VAT to supermarket groceries. But there is certainly a chance to convince decision-makers that a reduced rate of VAT for eating and drinking out would be beneficial for the UK and the ALMR has been working with its European partners at HOTREC to put our message across.
A recent report by HOTREC, the umbrella body for European hospitality associations, shows the benefits of long term application of low VAT rates on job creation and competitiveness. Almost all the EU member states apply lower rates of VAT to accommodation and two-thirds to hospitality services.
Europe ranks second in terms of international tourism receipts generating 336.6 billion EUR, second only to Asia and the Pacific region. HOTREC’s report shows that in order to support growth and continue generating jobs in a sector that created 2.5 million in the last decade, the long-term application of low VAT rates are crucial.
As we approach the General Election, the report will provide powerful evidence in discussions around the effect of VAT on our industry. What the eating and drinking out sector needs is a sense of fairness when it comes to VAT. Pubs, restaurant and bars are fantastic employers and they perform crucial social, as well as economic, functions as well. Eating and drinking out businesses create 1 in 7 of all new jobs and the ALMR’s members, along with the wider sector, have been responsible for bringing customers back to town and cities after the recession.
A VAT cut for the sector can help stimulate demand, boost turnover and put employers in a better position to continue their investment in their venues and their team members. The Government may be concerned about the dip in VAT receipts but, as the HOTREC report shows, lower rates of VAT that are beneficial to both businesses and customers can be the key to success. Lower rate of VAT for pubs, restaurants and bars would also introduce a sense of fairness and would send a powerful message from the Government to businesses that it is ready and willing to support them.
Tax Equality Day will be an opportunity for pubs and restaurants to lend their support to the VAT campaign and will provide a great opportunity to involve customers and generate support. The ALMR will urging all its members to get behind the campaign and send a strong, unified message to the Government: that not only is a VAT cut for the sector fair, it would be a great way to boost growth and employment in every region of the UK.