Operators urged to cut prices to show impact of 5% tax rate
PUB operators across the UK are being urged to cut prices for one day only to highlight the impact a VAT cut could have.
The Jacques Borel VAT Club, a lobby group representing pub, restaurant and hotel operators, has called on licensees to cut their prices by 7.5% on the so-called Tax Parity Day (September 25) to “promote the benefits of lowering the rate of VAT to 5%”.
The VAT Club said it has written to every pub in the UK to urge publicans to back the campaign; it has distributed 50,000 copies of its ‘Taxing Times’ publication, which highlights the activity, along with 250,000 posters.
The group claims cutting the VAT rate for the hospitality sector, from its current rate of 20% to 5%, would benefit the UK economy as a whole, creating more than 600,000 jobs in the first three years.
It highlights France, where VAT was cut in 2009, as an example of the benefits a reduced tax rate can bring, claiming 225,000 jobs were created in the year after the VAT rate was cut for the hospitality sector from 19.6% to 5.5% (the rate in France is now 7%).
VAT Club founder Jacques Borel, who successfully lobbied for the lower VAT rate in France, said his aim is to “secure a more equal tax treatment for food sold throughout pubs, restaurants and food service”.
“We are calling on supporters of the campaign to reduce their prices by 7.5% for one day,” he said.
“This is the amount by which we believe prices would fall if VAT were cut to 5% on the assumption that 60% of any reduction would be passed on, in lower prices, to the customer. So, for example, on Tax Parity Day, the total price of a meal and drinks for a family of four would be reduced from £60 to £54.60.”
A number of operators are backing the VAT Club campaign, including JD Wetherspoon, Pizza Hut, Punch Taverns and Heineken.
JD Wetherspoon chairman Tim Martin said the pub chain is “aiming to make it our busiest day of the entire year”.
“Creating tax parity among pubs, restaurants and supermarkets will fulfil many government objectives,” he said.
“It will create more jobs and raise the amount of taxes which the government receives, since pubs and restaurants pay more taxes and create more jobs than supermarkets do.”
Image – Jacques Borel, VAT Club founder.