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Reduction of VAT in Swedish restaurant and bars but menu items not included

Thursday, 22 December 2011
The Swedish government has gone against the component of its DNA and decided to reduce taxes -- that is VAT for restaurant and eating out places such as bars and the likes, on the hope that more jobs and cheaper food would flood the sector. Yeah? Wrong!

Most of the tax cut seems to have instead stayed in the packets of the restaurants and bar owners.
On January 1, 2012 there will be more cut to the VAT of restaurant from the current 25 percent to 12 percent. Woa! Food would surely be cheaper here but the reduction will be in the food and drinks and not wine, spirits and beer.

If the tax cut hit full impact, then food prices in restaurants will decrease by 10 percent. That is not going to be true.
Rasta Group, which has 20 Roadside Restaurants scattered all over Sweden, promises to lower the price of daily specials. But the price cut will stop at 5 percent, from Skr84 to Skr80.

"We know that there are price increases, both wages and commodities will rise,"explains Rastas CEO Jan Bengtsson.

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Sports chain O'Leary has warned its franchisees to lower the price on selected items. But the price cut is only about 5 percent.
"We really had to raise prices. It's not that commodity prices are cheaper just because we lower the VAT, "said Wilhelm Vintilescu, president of O'Leary, the Trademark which owns the brand that sits on 58 sports restaurants in Sweden, according to Swedish business daily Dagens Industri

The Scandic hotel chain will cut prices, but not straight across.
"For some products we will lower more, for some, just a little less, "says Thomas Fankl, manager of the restaurants at 76 Scandic hotels.
"The price on our top sellers, hamburgers will be reduced from Skr149 to Skr129. Lunches are reduced by 8 percent straight across.”

But the reform is the major problem for a large conference organizer such as Scandic. Food eaten at conferences remains coated with a 25 percent VAT. This means that a conference guest who eats lunch and coffee will pay 25 percent of that at a banquet then in the evening they pay 12 percent.

 "There are huge challenges for us to draw boundaries and how a guest should perceive the differences,” said Thomas Fankl.

The Ministry of Finance hopes that the tax reform will provide 3500 new jobs, a figure that is disputed. Many restaurants according to Dagens Industri find it difficult to give exact figures to reflect what the government is aspiring in terms of job creations in sector.

"We anticipate hiring new staff - it depends a little on how the year unfolds, "said Rastas CEO Jan Bengtsson.

Hamburger chain Max, which had promised to reduce prices fully anticipates hiring.
"My assessment is that VAT reduction will create between 150 and 200 new jobs at the Max kiosks and restaurants ", was Richard Bergfors, CEO of Max.

Competitor McDonald's promises also price cuts and new employment, but will not talk OF numbers today.
BY Scancomark.se Team




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