Pubco tax equality day: what does it mean for the industry?
"At the moment, food and drink in pubs is subject to 20% VAT, whereas no VAT is charged for food sold in supermarkets. "
With a day of protest planned on Thursday 13 September by Britain’s boozers (or maybe just JD Wetherspoon), we thought we’d step away from the full English and take a look at what the Pubco Tax Equality Day means for the industry.
For those not familiar with the campaign, the day is aimed at highlighting the benefit of a VAT reduction in the hospitality industry and is being backed by UK Hospitality and the British Beer and Pub Association (BBPA).
At the moment, food and drink in pubs is subject to 20% VAT, whereas no VAT is charged for food sold in supermarkets. This means supermarkets can use the saving to sell alcohol at a discounted rate, which in theory means less people go to the pub for a bite washed down with their favourite tipple.
In case you hadn’t noticed, Wetherspoon, who must be rubbing its hands in excitement, largely drives the day. On the same day last year, it’s 900+ pubs saw like-for-like volume sales increase by 17%. No wonder Tim Martin is a fan.
And not wanting to sound cynical but Tim commented on Thursday by saying: “We’re aiming to make it the busiest day of the entire year in our pubs and would urge other pub and restaurant operators to participate too.”
The larger than life character initially backed the Jacques Borel campaign to cut VAT but pulled out in 2015, only to set up a new organisation two years later to continue driving the campaign. There was no Tax Equality Day in 2016.
Industry urged to take action
It’s reported that that the British Beer and Pub Association (BBPA) and UK Hospitality are urging other venue owners to join in. But looking at the BBPA website, we couldn’t find a list of any other pubs taking action.
The website claims: “The BBPA will continue to lead the campaign for lower tax on beer. The Government has plans to increase beer duty again this year and we will be campaigning hard to stop this from happening. We hope you will join the campaign to #cutbeertax”.
MPs call on government to reduce tax burden
It’s got the interest of our MPs. According to the Campaign for Real Ale (CAMRA), more than 100 MPs have backed an Early Day Motion that calls on the UK government to ‘reduce the tax burden’ on pubs.
The campaign is also being backed by Nigel Evans MP for Ribble Valley and President of the Parliamentary Beer Group, he said: “The hospitality campaign to recognise tax equality is a welcome and much anticipated event which now resonates with our national consciousness.
“This year’s Tax Equality Day has a special significance as it could be the final year before it achieves its goal as a result of the tax cutting freedoms which Brexit will endow the government with.” An interesting point Nigel, but very unrealistic.
But for an industry that generates £3.5 billion in beer duty alone, will the government really sit up and take note?
There was some joy last year, when Chancellor Philip Hammond announced in his Autumn Statement that duty on beer, cider, wine and spirits wouldn’t rise in keeping with inflation.
It’ll take a BIG change to taxation
However, and I might be wrong, but the last time we saw a change of this scale to tax was in 2001. Then Chancellor Gordon Brown announced that the current law, in which the government collected a betting duty of 6.75% from bookmakers and passed it on to betting shop punters as a 9% tax, was being scrapped.
This was after years of campaigning by the bookies and in response to stem the loss of betting turnover to online operators, which already offered tax-free betting. As part of the deal bookmakers agreed to a tax on their gross profits at a rate of 15%.
So, what does it all mean?
But, back to the bar. For punters, they’ll save 75p for every £10 they pay up or stick on a tab. For the industry, the BBPA say it would create at least 78,000 new jobs and provide a big boost to the economy.
Tim Martin said: “A reduction in the level of VAT on a long-term basis will create a level playing field and generate jobs in an important and vital industry.”
But what’s not clear from all the hype is how the money will be reinvested into the industry.
The revenue gets less money, punters spend increases, but how much will be invested back into the industry to create the jobs and skills training that Tim is claiming? And how much will go into the coffers of pub groups like JD Wetherspoon?
Now don’t get me wrong, I have nothing against JD Wetherspoon, and like the rest of the country I’ll be there on Thursday making my protest. In fact, I’m already looking forward to staggering home with more cash left in my pocket.