If You Can’t Tax The Poor Tax Their Food

Its hard to believe what the government will do to collect tax.

This is the new tax collection policy starting in Britain. In March, British Prime Minister David Cameron laid out plans to tax Cornish pasties and other snacks, a move critics say will hit working families at a time of economic hardship.

The British government has been embroiled in the “Pasty Tax” row since it announced plans to close a loophole that allows bakeries in Britain to serve hot takeaway food without incurring 20% value-added tax.

The items include pies, sausage rolls and pasties – a traditional delicacy eaten for centuries by miners in the southwestern English county of Cornwall, which consists of meat and vegetables in a pastry crust.

Greggs bakeries, a purveyor of fast-food, including 140 million sausage rolls per year, saw its shares slump 5.5 percent last week on news of the new tax.

Greggs chief executive Ken McMeikan met Treasury officials on Tuesday to plead his case and afterward said the government had “lost touch” on the issue.

“For ordinary, hardworking families, putting 20 percent on to a product that is freshly baked actually is going to make a severe dent in their pockets,” he said in a BBC interview.

The opposition Labour Party has often charged Cameron’s government with being “out of touch” with the average Briton, a message party leader Ed Miliband repeated while standing outside a Greggs shop.

Even a Conservative legislator, Nadine Dorries, has said Cameron and Osborne “don’t know what it’s like to go to the supermarket and have to put things back on the shelves because they can’t afford it for their children’s lunchboxes. What’s worse, they don’t care either.”

The National Federation of Fish Fryers jumped into the debate, calling the present tax provision “an utter mess” and wondering why their hot food taxed when the bakery next door was exempt.

The government expects the levy on sausage rolls and pasties, effective Oct. 1, to raise 105 million pounds ($167 million) in the first full year. A Treasury consultation paper drily noted that the change would only hit “individuals and households that purchase products that are affected by this change.”

Under current law, shops like Greggs’ have to charge sales tax — called Value Added Tax — on hot takeaways including soup and hot sandwiches. Pasties and sausage rolls are exempt because after baking they are left to cool in unheated cases.
Extending the tax to rolls and pasties is no simple change. According to the finance ministry, the tax now applies to food “heated for the purposes of enabling it to be consumed at a temperature above the ambient air temperature and which is above that temperature” when purchased.

The proposed change would tax any food hotter than the ambient temperature, but could pose difficult issues: do you check the temperature of the inside of the sausage roll or pasty, or the cooler crust? Might the buyer ask to have it cooled to get it tax-free?

Osborne denied that the government would be poking a thermometer into every pie and roll. Tax officials and bakers would simply agree on the portion of total sales which would be affected, he said.

“There are perfectly sensible ways of working this out,” Osborne said.

Mr. Cameron defended the so-called “pasty tax” at a joint press conference alongside International Olympic Committee Jacques Rogge, during which he was accused of being out of touch with ordinary Britons. “I am a pasty-eater myself. I go to Cornwall on holiday, I love a hot pasty,” said Mr. Cameron, who was educated at the elite Eton College and then at Oxford University.

He then said he thought the last one he had bought was from a chain called the West Cornwall Pasty Company at a train station in the northern city of Leeds (see the video).

But Mr. Cameron’s attempt to prove his common touch backfired when Network Rail, Britain’s railways operator, said there had not been a West Cornwall Pasty Company at Leeds station since March 2007.