Reducing VAT can re-employ

Unsurprisingly - considering the unpalatable alternative - the industry has welcomed the retention of the present regime in regard to excise tax and VAT in the drinks industry. But as we all know, this cannot be taken therefore as a time to sit back. 2011 is unlikely to be a cakewalk.

True, cross-border temptations should be diminished even more as VAT there rises to 20 per cent in the New Year (pity it didn’t get introduced before Christmas).
But now that the Budget’s over and we know what to expect for the next 12 months, the next imperative is to stimulate employment wherever possible.
In this regard, the idea floated for many months now that the on-trade drinks industry should benefit from a reduction in VAT to 13.5 per cent as in the case for the restaurant trade bears serious consideration from whatever Government accedes to power next year.
That’s not such a pie-in-the-sky idea.
A number of benefits would flow from it.
Firstly, it would encourage people towards the pubs and away from drinking at home, thus reducing alcohol misuse.
Writing in the British Medical Journal recently Dr Nick Sheron, a health expert and co-founder of the Alcohol Health Alliance, pointed out that ‘Pubs are expensive to run and have to charge more for alcohol. As a result, they pay more VAT which puts the price of a drink up even further”.
As we’re all aware, supervised drinking is a far far better thing than unsupervised drinking, pubs continue to act as a social hub in the rural community and ‘facilitating fiscal access’ to such an establishment (as civill servants would no doubt prefer to say) helps grease the wheels of sociability. By lowering the VAT rate for on-trade drinks but retaining it at its present high level for the supermarkets, the attractiveness of purchasing in bulk diminishes too.
A change in EU law has made it possible for the Department of Finance to reduce VAT on meals and drinks taken in pubs so one more bureaucratic hurdle has been overcome.
And there’s one more reason to look seriously at putting VAT on a par with that charged in restaurants: it has the potential to restore jobs to an ailing industry.
France introduced such a reduced rate of VAT in January 2009 to cover restaurant food and hotel accommodation. The result was an increase of 29,500 in jobs that year alone. Just think what it could do to the 70,000 working in the on-trade here… Happy Christmas!