Tax shift in consumption: calculators overheat with so many unknowns

The federal government hasn't yet proposed any specific terms. It's therefore difficult to estimate the precise impact on consumption of the VAT shifts decided upon in the budget agreement. Every food service provider has reached for their calculators to answer at least one question: what does this mean for profitability?

"We are not increasing VAT rates , but we are making a series of shifts within the existing rates," the Prime Minister stated curtly on Wednesday during his State of the Union address to Parliament. Bart De Wever (N-VA) claims to have taken on the "Herculean task" of a multi-year budget, but provided no further details about this shift in consumption tax, which is expected to yield the state €1.3 billion. None of the ministerial offices involved have been able to clarify the situation.

Due to the political uncertainty, food service professionals don't have the luxury of waiting. Group restaurants, fast-food chains, traditional restaurateurs, platforms... they've all already pulled out their spreadsheets and calculators or called in their accountants. Everyone is weighing how to absorb, spread, or pass on the increase, because behind the tax implications, an entire business model is sometimes at stake.

Festival organizers disappointed

Food service has become an essential part of the festival experience. A varied, high-quality culinary offering is a way for organizers to stand out from the crowd, keep people on site longer, and generate additional revenue, as Frederik Luyten, spokesperson for Pukkelpop, explained to Gondola Foodservice in July.

A festival is a food market in itself. While visitors enjoy their favorite artists, a gigantic orchestra is busy backstage with supplies. The tens of thousands of sandwiches, dozens of hectoliters of soup , and tons of sandwich fillings at Rock Werchter alone give an idea of the logistical challenge. And in Flanders, there are about three hundred festivals...

The festival sector is therefore rightly concerned about the impact of the VAT shifts on the prices of food courts, food trucks, and catering for volunteers. This is especially true because, according to the limited information filtering through from political decision-makers , VAT on overnight stays at campsites will double, as will VAT on takeaway meals and deliveries . Admittedly, this only means an increase of a few euros for festival-goers. But we shouldn't underestimate the consequences for suppliers, service providers, and all other links in the festival's value chain.

"In Luxembourg, the VAT rate is 3%, in France 5.5%, in Germany 7%, and in the Netherlands 9%. With a rate of 12%, Belgian organizers are at a disadvantage," Serge Platel, president of the FMiV (Federation of Music Festivals in Flanders), told De Morgen.

Less deliveries, more restaurant visits?

The affected restaurants will naturally react to the takeaway and delivery tax reform. But when and how? Will they adjust their prices? Will they stick with an increase that absorbs the VAT increase, or will they go further? These higher prices mean that UberEats, Deliveroo, and their ilk will earn more from the expensive commissions of the delivery platforms. But will customers continue ordering, or will this mechanical inflation curb their consumption? Higher margins are of little use when demand is falling. So many commercial unknowns on top of the political uncertainty.

Some operators dare to hope that disruptive prices for delivery or takeout meals will encourage customers to return to restaurants sooner. These are primarily businesses that sell fewer takeout meals. The pressure on demand could create profitability problems for restaurants that have built their businesses around takeout. The VAT increase will increase the economic pressure on certain players already suffering from higher labor costs, as well as from the decline in purchasing power and the resulting decrease in visitor numbers.

Major fast-food chains generally rely more on takeaway, with drive-thru options also playing a significant role. But Quick, McDonald's, and others aren't very open about this channel's contribution to their total revenue. One thing is certain: the fast-food giants rapidly expanding in the Belgian market have also had to pull out their calculators and await the necessary clarification from the federal government.

“When will taxes be commensurate with quality?”

The fiscal gray area also plagues players in the collective catering sector, such as Benoit Leplae, founder of Ekillibre, a Walloon supplier of healthy meals for school cafeterias. The young CEO was already struggling to keep costs under control and offer school meals based on high-quality ingredients and short supply chains . Meanwhile, strict public procurement regulations and the €3.70 price per meal are structurally lowering quality. Given the current situation, the announced tax shift is putting the sector under severe strain. Benoit Leplae, founder and CEO of Ekillibre.

"We're quietly fighting every day against inflation, social security contributions, competitors serving junk food, undercutting the market price... and so on! This new budget measure, which increases VAT on our delivery meals from 6% to 12% (from January), has a significant impact on our business and our partner caterers," explains the food entrepreneur.

The head of Ekillibre believes other businesses selling "junk" have more leeway to absorb the government's measure and raise their prices, because "customers, as we all know, are less price-sensitive when it comes to leisure purchases." Or they could compensate by raising prices on products that will benefit from a VAT reduction from 21% to 12%, "like soft drinks!"

"But for people like us, who swear by fair prices at all levels, 6% is enormous! And none of the 'solutions' we have are pleasant: Do we squeeze our partner caterers like lemons by demanding discounts? Do we take the 6% on ourselves and go bankrupt in a year? Or do we pass this increase on to the end customer, the parents of our children?" he emphasizes in a series of rhetorical questions.

Benoît Leplae admits that we're talking about euro cents here. "A rough estimate is an increase of 23 and 29 cents on our meals, for preschoolers and primary school children respectively. Almost nothing. " Except that the reasoning shouldn't be applied at the individual level, but on a scale of thousands. "For all parents and meals (ed.) combined, 30 cents is enormous. When will we see taxes commensurate with the quality of the food we serve? Healthy meals for children should simply be exempt!"