Sunday 5 July 2020

Tim Martin seems to get it.

Via msn.com

Pub owners say tax reductions are needed to keep industry afloat

Wetherspoons chairman and founder Tim Martin said “tax equality” was needed if pubs and restaurants were to “survive and thrive” in the future.

He told the PA news agency: “Supermarkets pay almost no VAT on food sales and pubs pay 20%. Without equality the price gap between pubs and restaurants and supermarkets will continue to grow so that ‘on-trade’ becomes more and more uncompetitive.”


CAMRA still don't get it:

The national chairman of the Campaign for Real Ale (Camra), Nik Antona, said he would like to see the Chancellor reduce beer duty – the tax on producing and selling beer – for the “on-trade”.

Mr Antona said: “He could reduce the duty on the on-trade and make beer cheaper in pubs than it is off-site, in supermarkets, and therefore reinvigorate the industry. It would bring people back to the pub and stop them drinking at home.”


This chap knows what he wants, but doesn't know how to get it:

The pub’s licensee, Steve Boulter... told PA: “Having had three months of all being on canned beer, which is a pound a can, you do think: ‘Will people come back?’ when it’s three or four pounds a pint. I agree with Nik. Pricing makes a big difference so it needs to be the other way round – cheaper in pubs and a bit more expensive in the supermarkets.”

That can easily be achieved.

Broadly speaking, the VAT on a £4 pint in the pub and the beer duty are about 70p each. Pub landlord gets £2.60 net.

On a 80p multi-pack can (440 ml) in the supermarket, the VAT is 13p and the beer duty is 54p. Supermarket gets 13p net.

A pint costs five times as much as a can.

If they scrapped VAT completely and added 50% to beer duty, what happens?

Let's assume that the consumer bears all the tax for simplicity.

Pub landlord can drop price to £3.65, minus £1.05 duty, still gets £2.60 net.

The can now costs 94p, minus 81p duty, supermarket still gets 13p net.

A pint now costs 'only' 3.9 times as much as a can, which is what the pub landlord wants.

14 comments:

Bayard said...

I suspect that the reason why drink (all drink,including water, unless it's out of the tap) attracts VAT and food doesn't is that, back in the day when VAT was introduced and all the special interests were clamouring for exemption, the food lobby was more powerful than the drinks lobby and was backed by Big Farmer. Back then supermarkets didn't really sell drink.
Presumably domestic tap water was made VAT exempt as part of the "VAT is a tax on luxuries" myth and the fact that very few domestic customers had meters back then. Commercial supplies, which were metered, were charged VAT at the standard rate.

Nessimmersion said...

The cynical in me says- bet the Home Brew market sees a bit of an uptick this year.
Combine a thirst for beer, massive increase in unemployment or a decrease in available cash = DIY.
There is a reason Norway has high sugar consumption - man is rational in that he will often seek to minimise tax.

Andrew Carey said...

Tim Martin is right of course, and also consistent as he's been making the point for a decade.
Buy a cheesecake at 'Spoons - 20% VAT
Buy a cheesecake at Sainsburys - 0% VAT
Buy a cheesecake at your farmers' market - 0% VAT.
And don't talk about the privilege of being given a table at 'Spoons with some cutler, and a serviette, because those things are baked into the price, which also includes the cost of the service, which is also taxed 'cos you've employed someone.
Take the cheesecake home and your wife serves it to you using your own cutlery - no taxation on that.
So we have a tax advantage both to domestic servitude and to Sainsburys. What a fecked up society we live in. We are doomed.

mombers said...

@AC a fair bit of the 'Spoons cost base is labour. 20% VAT on the price then 40.2%+ basic rate NI and tax on the labour component and you wonder why so many working people are in poverty??

ontheotherhand said...

I think that all taxes should be shown on receipts per item so that the consumer/voter understands the nonsense. Twix = chocolate which has VAT, chocolate hobnob= biscuit which has no VAT. Chocolate milk pre mixed has no VAT, chocolate milk powder does have VAT. Sunflower seed for humans has VAT, sunflower seeds for birds does not have VAT.

Mark Wadsworth said...

B, the plain drinks v luxury drinks is a bit trickier than that.

N, yes, home brewing and/or drinking from home instead of going to pub.

AC, agreed and yes, TM has been saying this for ages. He is top man.

M, agreed, like I keep saying, the basic rate of tax is closer to 50% than 20%.

OTOH, people wouldn't care. They'd only care if they realised they suffered a 50% basic rate of tax.

Bayard said...

OTOH, Lidl already do this, as, I think, do Tesco, though it's not obvious with Tesco, I think they mark VATable items with an asterisk.

Mark, are there drinks which are zero rated? I was under the impression there weren't any (and go and stand in the corner for implying that VAT is a tax on luxuries, when you know it's not.)

Bayard said...

"Tim Martin is right of course, and also consistent as he's been making the point for a decade.
Buy a cheesecake at 'Spoons - 20% VAT
Buy a cheesecake at Sainsburys - 0% VAT"

So let's say the cheesecake costs £3 from Mr Martin's suppliers and he sells it for £8 a slice, six slices to the cake. His added value (in the economic sense which includes labour) is £45 less the VAT, which is £8, i.e £37. So the tax on the added value is 8/37 = 21.5% Indeed, if Mr Martin buys the cake for £3 and sells it for £3 because it's just about to go out of date, then he pays 50p VAT on an added value of zero, an infinite rate of VAT.

mombers said...

@B Mr Martin pays 50p VAT on the cheesecake from the supplier. He then sells the cake for £3, including 50p VAT. His VAT return lon this item is 50p output VAT minus 50p input VAT = 0. Mark, correct me if I'm wrong but this is how VAT works, and indeed why VAT can be so stonkingly high as even if the end retailer evades it, the price includes net VAT collected all the way up the supply chain. Am I also correct in thinking that if Mr Martin sells the slice for £2.50 he will get a partial VAT refund.
The HUGE problem with VAT is a business that is marginally profitable is pushed out of business by VAT. Only if you sell products for £0 is there no tax payable, regardless of profit. This obviously excludes zero rates products but there are no businesses that only buy and only sell zero rated products

Mark Wadsworth said...

B, 'luxury' was tongue in cheek, you started this nonsense.

B and M, the manufacturer and Wetherspoons between them "add value" of £3 and HMRC gets 50p. Or maybe they "add value" of £48 and HMRC gets £8. The manufacturer will almost certainly be VAT registered - food is not exempt, it is ZERO RATED which means manufacturer can reclaim his own input VAT (on utilities, machinery etc).

M: "a business that is marginally profitable is pushed out of business by VAT"

Exactly, this is my main bug bear with VAT. A profitable business will still be profitable after corporation tax, just a bit less profitable. Corporation tax will never turn a profit into a loss and marginal businesses don't pay much corporation tax so don't really care. But a marginal business can be tipped over the edge by VAT!!

Forget all the other problems, they are minor in comparison, this is key to why VAT is so shit.

Robin Smith said...

My friend runs a high st barber. She's good so declares everything unlike most of them. A haircut costs £13 inc vat. Her accountant is advising her to reduce biz hours to get her below the vat threshold and undercut her competitors. Why are the faux left not looking out for their constituents here?

Robin Smith said...

I went to the pub first time since lockup yesterday. Gents on table next to me said their regular gammon and chips was now 30% more than before. Is this the pub insuring their business against upcoming govt action?

Bayard said...

2B and M, the manufacturer and Wetherspoons between them "add value" of £3 and HMRC gets 50p. Or maybe they "add value" of £48 and HMRC gets £8. The manufacturer will almost certainly be VAT registered - food is not exempt, it is ZERO RATED which means manufacturer can reclaim his own input VAT (on utilities, machinery etc)."

The manufacturer and Wetherspoons cannot "add value" ( even in that special pleading economists' meaning of "adding value") of £3, because the ingredients for the cake must have cost the manufacturer something. So it's the farmer, the miller, the other farmer, the dairy, the wholesaler, the importer, the manufacturer and Wetherspoons all have to be considered part of the same organisation which is adding the value that HMRC are taxing Wetherspoons for and Wetherspoons are paying. That sounds a bit far-fetched, even for economics, which is stuffed full of far-fetched assumptions made to crowbar recalcitrant facts into fitting its various theories.
Worse than Global Warming, really.

Mark Wadsworth said...

B: "So it's the farmer, the miller, the other farmer, the dairy, the wholesaler, the importer, the manufacturer and Wetherspoons all have to be considered part of the same organisation which is adding the value that HMRC are taxing"

Correct. Between them their "added value" is equal to final selling price. This is no mystery and this is exactly how VAT is supposed to operate.