JD Wetherspoon founder welcomes VAT cut as first step towards tax equality with supermarkets
JD Wetherspoon founder Tim Martin has welcomed the chancellor's VAT cut as the first step towards achieving tax equality between pubs, restaurants and supermarkets.
Last week Rishi Sunak announced a temporary reduction in VAT from 20% to 5% applying to food, accommodation and attractions in order "to support businesses severely affected by forced closures and social distancing measures".
JD Wetherspoon has said in response it will cut prices on a range of meals and drinks - including real ale, coffee, breakfasts, pizzas and burgers - from Wednesday.
Martin has long campaigned for a VAT cut to help narrow the price differences between hospitality venues and supermarkets.
He said: "Wetherspoon has campaigned for tax equality between pubs, restaurants and supermarkets for many years.
"Supermarkets pay no VAT on food sales and pubs pay 20%. Supermarkets pay about two pence per pint of business rates and pubs pay about 20p.
"These tax differences have helped supermarkets to subsidise their selling prices of beer, wine and spirits, enabling them to capture about half of pubs' beer sales, for example, in the past forty years.
"A VAT reduction will help pubs and restaurants reverse this trend – creating more jobs, helping high streets and eventually generating more tax income for the government.
"Not every UK hospitality business will be able to reduce prices immediately.
"Some will need to retain the benefit of lower VAT just to stay in business. Others may need to invest in upgrading their premises.
"However, lower VAT and tax equality will eventually lead to lower prices, more employment, busier high streets and more taxes for the government. Congratulations to Chancellor Rishi Sunak for a sensible economic initiative, which is long overdue."
Some operators have said the chancellor's VAT cut is not intended to be passed on to consumers, expressing concerns that those doing so could make price cuts an expectation.
David Stein of Cafe-bar 1807 in Linlithgow, near Edinburgh, told The Caterer that JD Wetherspoon's move was an attempt to undercut independent operators who could not afford to do so.
He said: "The whole reason for the VAT reduction was to help the industry for the next six months. To bribe customers with a price reduction to get them back out, is bad for the industry as a whole. I had made the decision to reopen with 15% as it made my business viable – prior to that I couldn't have reopened."