Thousands of pubs and restaurants across the UK are reducing their prices by 7.5% on Wednesday in a protest against current VAT rates. The campaign, dubbed 'Tax parity day', has been organised by the lobby group of French businessman Jacques Borel.
Currently, customers pay 20% VAT on food consumed in pubs and restaurants. Campaigners argue that this is unfair and that VAT should be cut to the reduced rate of 5%, which mainly applies to domestic energy supplies. They claim such a cut would generate an extra £1.5bn in taxes over three years and create 600,000 jobs.
However, a Treasury spokesperson rejected the industry's case, stating that a 5% reduced rate on catering services would cost around £9bn to the Exchequer. The government maintains that the current VAT system is fair, despite anomalies such as zero-rated cold takeaway food versus standard-rated hot takeaway food.
James Staughton, managing director of St Austell Brewery and chairman of the Independent Family Brewers of Britain, said he was taking part in the one-day price reduction because he believed a tax cut could boost employment and help growth. 'We are a large industry... the hospitality sector looks after visitors. We are a seasonal business and by increasing the number of visitors (through price cuts) we will help the economy,' he told BBC Radio 5 live.
Large chains such as Pizza Hut and JD Wetherspoon are participating in the campaign. Tim Martin, chairman of JD Wetherspoon, argued that supermarkets can subsidise alcohol sales, whereas pubs generate more tax per pint sold. The companies involved expect a 10% increase in sales from the price reduction.
