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Cutting VAT on food and drink in the hospitality industry from 20% to 5% would create up to 670,000 jobs, the Jacques Borel VAT Club has claimed.
The VAT Club, which includes 43 members in the pub, restaurant and hotel businesses, based the claim on a survey which found that its members would pass on more than half of any VAT cut by lowering prices. This would increase customer traffic by 10-12%, thereby boosting job numbers and staff wages.
The study also revealed that the suggested VAT cut would result in an initial loss to the Treasury of between GBP5.5bn and GBP7.8bn. However, the losses would be reduced as the sector grows.
Jacques Borel, a French entrepreneur who has campaigned successfully across Europe for VAT reduction in the hospitality sector, said: "The study shows that a targeted VAT reduction to 5% 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."
Borel’s comments coincided with the news that the Restaurants Association of Ireland (RAI), which represents over 800 members in Ireland, has launched a campaign to keep VAT at 9%. Adrian Cummins, the CEO of RAI, claims that the Irish Government’s introduction of 9% VAT in July 2011 has been successful.
"When the economy went into decline, restaurants endured falling numbers of diners, rising prices and great financial uncertainty with many facing and/or experiencing closure," he said. "Money generated by this reduced VAT rate, however, has kickstarted a reversal of fortunes. In the past eighteen months, over 10,000 new contracts were issued and this growth will continue with an additional 5,000 jobs to be created over the next year if VAT at 9% remains in effect."
Currently 13 of the 27 nations in the European Union apply a reduced rate of VAT to out-of-home foodservice.
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