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#TaxEqualityDay: Pubs and restaurants unite for VAT cut

By Melodie Michel , 24-Sep-2014
Last updated on 25-Sep-2014 at 10:04 GMT2014-09-25T10:04:25Z

Over 15,000 venues today cut their prices by at least 7.5 per cent
Over 15,000 venues today cut their prices by at least 7.5 per cent

Over 15,000 pubs and restaurants across the UK cut their prices by at least 7.5 per cent on 24 September to show the positive impact reducing VAT to 5 per cent would have on the hospitality sector.

Over 40 restaurant and pub groups are got involved in the event - organised by Jacques Borel’s VAT Club - including Punch taverns, JD Wetherspoon, TGI Fridays and Fuller’s, all offering price cuts of between 7.5 per cent to almost 15 per cent in some cases.

Experts have been urging the government to cut VAT and bring it to the levels observed in certain European countries such as France, and the movement gained momentum in recent months with The Sun newspaper’s Give Us a Break campaign and the Cut Tourism VAT campaign’s report on the financial benefits of a 5 per cent VAT .

David Campbell, head of Restaurants and Bars at BDO said: “As one of only four EU member states who do not have a reduced VAT rate for tourism, there is a risk to competitiveness as a destination for foreign tourists as well as domestic customers – a point that Jacques Borel’s Tax Equality Day is campaigning for.

“Anything that can be done to protect the industry is important, especially if, as research suggests, it can be done in a tax neutral way for the Treasury. A reduction in the VAT rate to 5 per cent for the industry would generate growth in the hospitality sector, including jobs, but would also encourage competitiveness within Europe and rest of the world.

“Moreover, including pubs and restaurants within the reduction would ensure a comparability of prices between supermarkets and eating out destinations.”

Unlikely win

But according to Dimitris Hiotis, partner at the London office of pricing consultancy Simon-Kucher & Partners, it is unlikely the government will yield to pressure from the industry anytime soon.

“While the campaign aims to increase support for lower VAT from the public, thereby increasing political pressure, the campaign is unlikely to yield results in the short term. This is because at the moment the government is achieving a reduction in unemployment, GDP is growing relatively well and tourism is generally increasing, while at the same time tax revenue is quite important to reduce the government debt.

“However, if and when there is need for a boost in the UK economy, such a measure may be considered, in the same way that the VAT was reduced at the beginning of the financial crisis to boost demand and growth.

“These kinds of campaigns allow the industry to prove to the government the beneficial effects of a different taxation regime and help build a more robust argument for it,” he pointed out.