Restaurant owners cry foul over takeaways

More than 200,000 people work in Switzerland's hotel and restaurant sector AURA

Swiss restaurants and hotels have been suffering as a result of competition from takeaways. Their trade association has mounted a political campaign to derail the success of the rival businesses, which are favoured by a lower level of taxation.

This content was published on August 14, 2014 - 17:00

On September 28 voters will have the final say on an initiative calling for a level playing field in the catering and retail sector.

It’s hard times for Swiss restaurant proprietors. Since 2010, in spite of some slight growth in the nation’s economy and a steady increase in population, the revenues of the restaurant business have dropped from CHF26 billion to CHF23.1 billion.

This decline particularly affects outlying areas of Switzerland, where the number of restaurants is dropping year by year. But also in urban centres, where there has in fact been an increase in numbers, the situation is not much better – there are too many businesses for the demand, and many such establishments have trouble breaking even.

This crisis has several causes. On one hand, the restaurant business is paying for the weakness of Swiss tourism: since 2008 overnight stays have dropped more than 7%, due - among other things - to the high value of the Swiss franc.

In border areas, on the other hand, the favourable exchange rate prompts the Swiss themselves to go for lunch or dinner across the border. The lowering of the legal limit for drinking and driving to 0.5 per mil and the spread of the smoking ban have not done the restaurant business any good either.

But there is another factor that has been worrying restaurant owners for a while: changes in the public’s eating habits.

In the past two decades, a growing number of Swiss people are no longer taking the time to have a meal in a restaurant or café at lunchtime, but prefer to get fast food and eat it on the go or at their desk. Takeaway outlets have mushroomed and are competing more and more with traditional restaurants.

Level playing field

So the trade association Gastrosuisse decided to mount a counter-attack. In 2011 it submitted an initiative to the government, in which it demanded a level playing field for restaurants and takeaways, at least as regards tax.

Currently, while food and drink in restaurants are taxed at a rate of 8% Value Added Tax (VAT), the levy on takeaways is just 2.5%.

The discrepancy goes back to 1995, when VAT was introduced. It was decided to apply two different rates for food products sold over the counter and those served in restaurants.

“At that time the takeaway business had hardly developed, but today there are more and more outlets selling food ready to eat, often hot food, and they benefit by the lower tax rate,” explains Klaus Künzli, who has just retired as president of Gastrosuisse.

According to his association, it is unjust that a sandwich or a coffee served in a restaurant is more heavily taxed than the same product sold by a takeaway. Its proposal is that the same rate of tax be applied to any business serving food as applies to the catering business.

Losing tax revenues

For the government, Gastrosuisse is going too far with its demand.

The only way to implement the initiative as it stands would be for the VAT rate payable in restaurants to be lowered. That would mean a loss of CHF700-750 million annually to the federal coffers.

Any compensatory taxation measures would fall on other sectors, with social consequences too. An alternative solution would be to raise the rate of tax due on other food products, including those sold by retailers. These products are currently taxed at a low rate because they are regarded as necessities. So an increase would be hard to justify.

This position is shared by parliament, where the left and most of the centre have come out against the initiative.

“We can understand the desire to narrow the gap between takeaways and restaurants,” says Social Democrat Prisca Birrer-Heimo.

“But from a social point of view, we cannot charge the same tax on retail sale of food, which involves people’s basic needs. This is not the case with a restaurant meal, where the customer is paying for other things like the infrastructure, the service, and the setting,” says Birrer-Heimo, who is also a champion of consumer protection.

“The present situation is not ideal, but the proposal from Gastrosuisse would create even greater distortions,” adds Ruedi Noser of the centre-right Radical Party.

“If the restaurant business is in a tough situation it’s not because of VAT, but because of the change in consumer habits – many people now prefer to eat on the go and take only a short break for lunch. Anyway, we do not see why the restaurant business should get a special deal when several other sectors are looking for a tax break too.”

Struggle for survival

In parliament the Gastrosuisse initiative is being supported only by the Swiss People’s Party. “The restaurant business represents a big sector of the economy,” explains parliamentarian Sylvia Flückiger-Bäni.

“Together with the hotel sector it employs 210,000 people, which is over 5% of the working population. For an number of years it has been one of the sectors that have to fight the hardest to survive.

“For this reason alone we think it appropriate to support this initiative, which is not creating any special privileges, but aims to eliminate the current disparity of treatment between restaurants and takeaways,” Flückiger continues.

She says a lot of money has been spent in recent years on public awareness campaigns about eating a healthy and balanced diet.

“These kinds of meals are provided most of all by restaurants, which offer a relaxing atmosphere as a break from work at lunchtime. The current VAT arrangements, however, favour the trend to eat fast food that is not balanced, bought from a takeaway or shop,” she says.

Gastrosuisse Initiative

Signed by over 118,000 citizens, the initiative “Stop discriminatory taxes on restaurants” was submitted in September 2011 to the government by the association of Swiss hotels and restaurants, Gastrosuisse. Their proposal calls for just one thing: that the services of the restaurant business be subject to the same rate of tax as other foods sold, including takeaway and retail. This would not include alcoholic beverages and tobacco sold by restaurants.

The government and a majority in parliament have recommended rejection of the initiative at the ballot box. Only the rightwing Swiss People’s Party and a few members of centre parties supported the Gastrosuisse proposal during the parliamentary debate.

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 VAT in Switzerland

Switzerland has one of the lowest VAT regimes in Europe. Most products are currently taxed at 8%. A special rate of 3.8% is being applied to the hotel sector, which has been going through a difficult patch. Numerous products considered as necessities or of social and cultural importance – retail foods, medicines, seeds, books, newspapers – are taxed at 2.5%. No tax is levied on a number of social, health, cultural, sporting and educational services.

VAT is the government’s biggest single moneymaker. In 2012 it yielded CHF22.3 billion, over a third of all tax revenues.

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