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Food VAT reduction 'could create 670,000 jobs'

02 | 05 | 13

As many as 670,000 new jobs could be created in the hospitality industry by cutting VAT on food and drink, according to research from the Jacques Borel VAT Club.

The organisation, which represents 43 pub, restaurant and hotel operators, wants the government to reduce VAT on food from 20 per cent to five per cent.

It argued that members of the industry would pass on more than 50 per cent of any VAT reduction in the form of lower prices, supporting increased customer traffic which would in turn lead to job creation.

If VAT was cut to five per cent on food and drink, the Treasury would face an initial deficit of between £5.5 billion and £7.8 billion. However, the report claimed these losses would reduce sharply due to the knock-on effect of the newly generated jobs.

"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," Mr Borel commented.

He added that the UK should "follow the lead of its European neighbours in boosting its economy and creating employment, particularly among the young, many of whom already begin their careers in the leisure sector".

Catering equipment suppliers could also expect a boost if the tax rate was slashed, with pubs and restaurants taking the opportunity to upgrade their kitchens. 

Supporters of the Jacques Borel VAT Club include JD Wetherspoon, TGI Friday's, Pizza Hut, Subway and Punch Taverns.

Mr Borel, a veteran businessman of the French hospitality and catering industries, has campaigned successfully for VAT reductions on food and drink across Europe. In 2009, cafes and restaurants in his native country were granted a VAT reduction from 19.6 per cent to 5.5 per cent.

He is also credited with bringing fast food to France with the launch of the Wimpy restaurant brand in 1961.ADNFCR-16001031-ID-801580890-ADNFCR

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