Restaurant tax cut could create 15,000 jobs

The survey assumes a lowering of the value-added tax (VAT) on restaurant services from 25 percent to 12 percent, the Swedish Retail Institute (Handelns Utredningsinstitut, HUI) reported.

The report was developed on behalf of the Swedish Hotel and Restaurant Association (SHR) and its findings are supported by a number of the country's leading economists.

"The report clearly shows that lowering the restaurant VAT is a simple and effective tool to create 15,000 new jobs," said SHR CEO Eva Östling Ollén in a statement. "It is remarkable that the political parties are reluctant to implement this effective measure against youth unemployment and marginalisation."

HUI's report shows that a reduction in the restaurant VAT to 12 percent from the current 25 percent would result in the creation of between 7,000 to 34,000 new jobs in Sweden.

From this assessment, SHR estimates that at least 15,000 new jobs would be a more realistic level. It would represent a reduction of the current youth unemployment rate by almost 10 percent.

Combined with continuing reductions in employer contributions, the Swedish tourism industry could generate substantially more jobs, especially for young people.

"The restaurant industry employs mostly young people," said Östling Ollén. "More than a third are under 25."

SHR's assessment of the impact of a reduced restaurant VAT is also supported by some of the country's leading economists. HUI's report was sent to them for their opinions on the impact of tax breaks in the service sector.

A clear majority believe that a measure to lower restaurant taxes is an effective way to boost employment, particularly for groups with a weak labour market position.

Sweden currently has the world's highest restaurant taxes. After the EU Commission gave member states the opportunity to lower the restaurant VAT last year, France and Belgium reduced their taxes, with Finland following suit on July 1st.

Östling Ollén recalled that the government promised to investigate the possibility of reducing the VAT on restaurant services, among other things, in January 2011 in order to create new jobs, but she would like to see an earlier date.

"I can understand the government waiting on lowering the restaurant sales tax given the recession," said Östling Ollén. "However, now it is the time to implement this. It is important that it is done quickly, when a possible red-green government is not as consistent on the issue."

According to a poll conducted Novus on behalf of SHR, six out of 10 Swedes think that it is wrong that the VAT rate on food is different. More than half said they would dine out more frequently if the restaurant VAT rate was lowered to supermarket levels.

"The VAT on food served in restaurants is currently more than twice that of food from a grocery store," said Ollén. "A decline to 12 percent would also represent that we are getting rid of an unfortunate and unfair system."

Such a reduction in restaurant prices is equal to the VAT decline of 13 percentage points that SHR recommends, which would cost the same as two lunches per month for those who eat out every day.