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Cut in VAT would boost pubs -- Borel

Added: Tuesday, April 30th 2013

 VAT cut would create 670,000 jobs 

A new study released today (Tuesday, 30 April), commissioned by the Jacques Borel VAT Club, which represents 43 major pub, restaurant and hotel operators, has concluded that a cut in VAT from 20 per cent to 5 per cent on food and drink could create as many as 670,000 jobs in the UK.  

The Jacques Borel VAT Club is supported by a wide range of pub, restaurant, food service and hotel companies, including Charles Wells, Fuller’s, Heineken, JD Wetherspoon, Mandarin Oriental, Pizza Hut, Pret A Manger, Prezzo, Punch Taverns, Roadchef, SA Brain, Shepherd Neame, St Austell, Subway and TGI Friday’s.  

A survey of operator members by the VAT Club has found that they would pass on more than 50 per cent of any VAT reduction in lower prices, creating increased customer traffic of between 10 and 12 per cent. The increase in traffic would lead to the job creation levels outlined in the report. The savings would also be used by operators to increase staff pay, as well as increase investment levels and training.  

The study finds that the Treasury would see an initial loss of between £5.5 billion and £7.8 billion as a result of reducing VAT to 5 per cent in the sector. However, the losses reduce sharply as employment generation produces increased tax receipts, businesses in the sector pay higher tax receipts and the "black economy" shrinks – also 60% of jobs created would be among those previously unemployed.  

The report states: “Under certain potential scenarios, the overall impact of the dynamic stimulus that a VAT reduction would give to sector growth would be fiscally neutral. In other words, the indirect gains to the Exchequer could offset the direct loss in VAT yields.”   

Jacques Borel, a French entrepreneur who has successfully campaigned for VAT reduction in hospitality across Europe, said: “The study shows that a targeted VAT reduction to 5 per cent in the hospitality sector would be a very powerful and cost-effective way of creating employment in the UK. There would be an initial loss of revenue to the Treasury but, as many other countries in Europe have discovered, the losses are quickly reduced – and even made neutral – as the sector grows turnover and creates jobs.”  

A total of 13 of the EU’s 27 countries already apply a reduced rate of VAT to out-of-home food service. In July 2011, Ireland, for example, opted to apply reduced VAT to its room accommodation and restaurant sectors as an economic stimulus to boost tourism.  

Borel added: “The UK should follow the lead of its European neighbours in boosting its economy and creating employment, particularly among the young, many of whom already begin their careers in the leisure sector.”