High street baker Greggs has used its latest market update to attack the "unworkable" VAT rise the government has planned for freshly baked food.
A consultation on the proposed tax ends on Friday, which could be introduced October and would add 20% to freshly-made items such as pasties, pies, and sausage rolls.
The company said savoury sales were more than a third of its turnover, and the outcome of the consultation process could have a material impact on sales and profits.
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In the first 19 weeks of 2012 the firm saw total sales rise 4.3%, while like-for-like sales were down 1.8%.
It said it had suffered six disappointing weeks of trading as a result of the exceptionally wet weather in April and early May.
It said it had opened a net 20 new shops opened and completed 42 refits, while its wholesaling business expanded with eight new frozen take-home products.
Greggs said the plan to simplify VAT on hot takeaway food would impact on freshly baked food where there was "no attempt to keep it hot and which is not designed to be kept hot".
The firm said it feared the current proposal would have a disproportionate impact on the specialist bakery sector, "resulting in further unemployment, high street closures and reduced investment".
It said estimates of the extra VAT revenue that would be brought in made insufficient allowance for the Income Tax, NI contributions and Corporate Tax that would be lost, as well as the cost of extra unemployment pay.
It offered an alternative solution which would see VAT levied on all food kept hot for sale in a heated environment after cooking, all food re-heated to order and all food supplied in heat-retaining packaging.
"This will very clearly differentiate between fresh bakery food and food that is being sold intentionally hot," it said.
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