When Chancellor George Osborne announced plans to raise VAT to 20% next year in the emergency Budget in June, the British Beer & Pub Association said it was the "price to pay for tackling the deficit".
But with just weeks until the tax hike takes effect, on 4 January 2011, such a sanguine view is clearly not shared by many in the hospitality industry.
For JD Wetherspoon chairman Tim Martin, the increase in VAT will "greatly exacerbate" the competitive disadvantage pubs and restaurants face versus supermarkets.
"Supermarkets pay no VAT on food and the cash VAT per pint or bottle of wine is much lower than pubs and restaurants because their prices are lower," he says. "In France they have redressed this balance by reducing VAT on food in bars and restaurants to 5% and the French government has lost no tax, owing to higher employment taxes, prices and more jobs in the catering sector. We badly need to follow suit or supermarkets will kill us with their tax advantage."
Nick Cash, owner of the Brickhouse restaurant and bar in east London, agrees that hospitality gets the rough end of the VAT stick. "We don't pay VAT on our food when purchased but, when sold, we have to charge, which we feel is unfair - it should remain consistent," he says. "Our industry is being unfairly hit and should be looked at as a separate group; especially the small independents like us."
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