High streets and the age-old institution of the pub are being put at risk by "unfair" levels of tax, according to a leading hospitality boss.
Tim Martin, founder of JD Wetherspoon, which operates five major bars in Aberdeen and Aberdeenshire, said that the biggest threat to the hospitality industry was “the vast disparity in tax treatment between pubs and restaurants and supermarkets”.
He said supermarkets paid a zero VAT rate on food sales, whereas pubs and restaurants paid 20%, which in turn allowed supermarkets to subsidise the price of beer in their stores.
"We estimate that supermarkets have taken about half of the pub industry's beer volumes since Wetherspoon started trading in 1979, a process that has likely accelerated following the pandemic," he told investors yesterday.
"Pub industry directors have, in general, failed to campaign for tax equality, which is an important principle of taxation.
"Unless the industry campaigns strongly for equality, it will inevitably shrink relative to supermarkets, which will not help high streets, tourism, the economy overall, or the ancient institution of the pub."
Long-term structural change
Mr Martin praised Peter Borg-Neal of Oakman Inns and Restaurants - who has campaigned for longer-term structural change to the way pubs are taxed - for his stance on the issue.
Mr Borg-Neal said recently: "In my opinion, we need to stop campaigning for short-term interventions to support our sector. The focus needs to be on long-term structural change. Our sector is ridiculously overtaxed compared with the rest of Europe.
"We should focus our efforts and campaign on two issues only - business rates and VAT. The first is an antiquated tax that delivers an unfair burden on our sector. The second is a nonsense. For there to be no VAT on processed meals but for VAT to be charged on food in our sites is an abject nonsense.
"Furthermore, I think it can be proven these taxes reduce income for the (government) by depressing growth in our sector."
Sales still behind pre-CV19 levels
In a trading update yesterday JD Wetherspoon reported sales still lagging behind pre-pandemic levels.
The chain, which runs 844 pubs in the UK and Ireland, disclosed in the 25 weeks to January 22 like-for-like sales growth of 13.1% compared with a year earlier, but still 0.7% lower than the equivalent pre-CV19 level.
In the past 12 weeks, its like-for-like sales were 17.8% higher year-on-year, but 2% lower relative to the pre-CV19 levels.
Mr Martin acknowledged that costs— including labour, food, energy and maintenance — were far higher than before the pandemic, although the group still had the financial strength in the period to repay CV19-related loans of £100million and its financial headroom was expected to be about £225million.
JD Wetherspoon operates five bars in the North-east of Scotland, including the Archibald Simpson and The Justice Mill on Union Street, The Gordon Highlander in Inverurie, and The Cross Keys in Peterhead.
The Saltoun Inn in Fraserburgh is one of 35 pubs it currently has up for sale.