Tim Martin: Why pubs will pay the price for VAT disparity

First, it is universally acknowledged that taxes should be fair and sensible, and the current VAT disparity is neither. It does not make sense for the tax system to favour supermarkets, since the Government collects so much more tax per pint or meal if they are consumed in pubs.

A pint in a pub costs about £3.20 and around 40% of that goes in taxes of one sort or another — the tax alone on a pub pint is more than the price of a pint in a supermarket.

In addition, pub pints and meals create far more jobs than those purchased from supermarkets. It is illogical and unfair to give supermarkets a tax break when pubs contribute so much more to the economy, quite apart from the greater social contribution.

Advantages​

The VAT Club has painstakingly analysed the effects of a cut in the VAT rate to 5% for pubs and restaurants. We are confident, based on an analysis of a similar cut in France, that there would be a modest cost to the Treasury in the first year, but that 600,000-plus jobs would be created, leading to higher payroll taxes, fewer empty shops/pubs and higher corporation tax receipts, among other advantages.

Griffiths himself used almost identical arguments in his efforts to end the beer-duty escalator. In November 2012 he told Sky News “scrapping the escalator would save thousands of jobs in the first year alone and stop the closure of hundreds of pubs in our communities… This is a huge opportunity to bring balance and fairness into the duty system and to support our pubs and breweries... Over (recent years) beer sales have plummeted, depriving the Treasury of tax for lost sales… [It] doesn’t make sense, it’s unsustainable and it’s unjustifiable”.

Toxic​

These arguments apply more strongly to VAT than to the duty escalator because the latter, for all the faults Griffiths correctly highlighted, applied equally to pubs and supermarkets.

The VAT differential is, however, far more toxic, as it creates a massive tax advantage for supermarkets — which will be fatal for many (perhaps most) pubs.

Recent years have seen pub closures, lost jobs/taxes and the social side-effects of this. Having lost half our beer sales already, the issue for the trade, public and MPs is whether pubs can survive in the face of the current tax break for superstores.