Wetherspoon slams pub tax burden

JD Wetherspoon has reported record sales and profit for its last financial year, although the UK pub chain used this announcement to hit out at the tax discrepancy between pubs and supermarkets.

The group, which runs more than 900 pubs across the UK and Ireland, saw revenue rise by 10% to £1,409.3 million, with a 3.1% increase in pre-tax profits, which reached £79.4m in the 52 weeks to 27 July 2014.

Despite this positive performance, Wetherspoon chairman Tim Martin reiterated his previous criticism of the UK tax system, which sees pubs pay 20% VAT on food sales while supermarkets remain largely exempt.

“The biggest danger to the pub industry is the VAT disparity between supermarkets and pubs,” he insisted. As a result, Martin confirmed that Wetherspoon was lending its support to the VAT Club group founded by Jacques Borel, which will stage a Tax Equality Day on 24 September as part of its wider campaign for lower taxes across Europe.

Outlining his case, Martin commented: “We continue to believe that pubs are taxed excessively and that the government would create more jobs and receive higher levels of overall revenue, if it were to create tax equality among supermarkets, pubs and restaurants.”

He argued that the current tax disparity “enables supermarkets to subsidise their alcoholic drinks sales to the detriment of pubs and, indeed, restaurants.”

As a result, continued Martin, “This serious economic disadvantage has contributed to the closure of many thousands of pubs, and the pub industry has lost approximately 50% of its beer sales to supermarkets since VAT was increased from 8% over 30 years ago.”

In order to highlight the pressure this additional tax burden places on pub businesses, Martin noted that last year saw Wetherspoon generate a total of £600.2m in taxes, equivalent to £662,000 per outlet and around 43% of sales revenue. Of this total 2013/14 tax bill, VAT accounted for by far the largest proportion at £275.1m.

Martin also linked this issue to a wider criticism of the UK Corporate Governance Code, which, he argued, “has helped to create unstable board rooms, often preoccupied by the wrong considerations. For example, many do not even recognise the danger from the VAT disparity, despite the high weekly level of pub closures which has lasted for many years.”

In particular, Martin argued that compliant boards tended to be too “City centric” and placed too much emphasis on board meetings rather than visiting pubs or listening to customer feedback.

Drawing a link between this approach and the debt problems faced by a number of large pub groups in recent years, Martin warned: “The road to hell in pub companies lies in emphasising the views of shareholders over those of employees on the ‘front line’.”

Returning to his own company’s performance for the first six weeks of its 2014/15 year, Martin reported that like-for-like sales were up by 6.3% with total sales increasing by 11.4% as he predicted “a reasonable outcome in the current financial year.”