Britain: Taxing the Toasted Sandwich
- Jun 25, 2014 | Gail Cole
Sales tax laws can seem arbitrary, or even absurd. Points of tax contention can astound. Did the Streamlined Sales Tax Governing Board really spend months debating whether or not take-and-bake pizza was a taxable prepared food or an exempt food needing additional preparation? Yup. And they’re not alone.
Silly sales tax situations aren’t unique to the United States. Take the debate that has raged for years over Britain’s value added tax (VAT) on hot sandwiches.
Hot, takeaway foods like Subway’s toasted sandwiches (or toasties) are subject to a 20% value added tax in Britain. A similar food, the Cornish pasty, was exempted from the 20% VAT after bakers took to the streets in protest. The loophole enabling the exemption: pasties and sausage rolls are typically left to cool before being served. So long as they’re cooling, pasties and their brethren are exempt from VAT. Pasties sold hot (either fresh from the oven, warmed by a light, or reheated) are still subject to the 20% VAT. Check out the BBC’s pasty tax chart for additional details.
But there is no exemption for Subway’s toasted sandwich or its meatball marinara, and Harvey Brown, owner of a Subway in Exeter, says that doesn’t make sense. “I haven’t spoken to anyone who can understand why toasted sandwiches should have VAT added but pasties shouldn’t.” The British Chancellor, says Mr. Brown, is “telling sandwich shop owners they’re second class citizens and that bakers are more important” (Mirror).
Subway took its case to court but lost. In the judgment by the Court of Appeal, Lord Justice McCombe says the policy of taxing hot take away food or food consumed in restaurants “seems tantalizingly simple.” He added that the fact that the court was provided “no fewer than eleven volumes of legislation and case law to enable us to reach our decision on this apparently straightforward point… does the law, and particularly the law of the European Union, no credit.”
It’s fun to point out the absurdity of these situations, but sales tax and value added tax have real impacts on business. With the 20% VAT on toasted sandwiches, “a £5 sandwich costs £6.” The budget conscious may opt to enjoy their sandwich cold, or they may opt to tuck into an exempt pastie instead—a pastie sold by someone else.
Like silly sales tax laws? See some of the silliest.