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Restaurants not doing enough

Minister finally admits that, following a cut in VAT to 5.5%, restaurants are not dropping their prices

RESTAURANTS are not doing enough to pass on a cut in VAT to their customers, a government minister has said.

Minister for commerce and tourism Hervé Novelli said: “I don’t think they have done enough, even if half of the ground has been covered.”

To benefit from the cut in VAT, restaurant and cafe owners had to sign up to the contrat d’avenir (contract for the future), agreeing to drop the price of at least seven key menu items, among other commitments.

Mr Novelli, who brought in the tax break, said price drops had been “small” and needed to drop further before he felt restaurants owners were satisfying their end of the contract.

He asked restaurant owners to exercise responsibility for “success before the end of the year”.

It is the first time Novelli has publicly criticised those in the industry.

When a survey in July showed restaurant prices had dropped by only 1.3%, despite a cut in VAT to 5.5%, Novelli said at the time that signs were encouraging. Prices in cafes dropped just 0.7%.

The plan was criticised for not making explicit arrangements with restaurant owners who could pick and mix options.

The “contract for the future” refers to:

- A full price reduction of 11.8% on at least seven key menu items in traditional restaurants, with reductions clearly marked on menus.
- In cafes, a full reduction on coffee, tea and a cold drink.
- In fast-food restaurants at least a 5% reduction on flagship menus for the brand.
- 5.5% VAT applies to all menu items apart from alcohol in all restaurants and cafes.

A spokesman for leading restaurant body Synhorcat, said it was acceptable if some restaurants did not lower prices but instead invested in other ways.

Latest figures also show that the 20,000 jobs supposed to be created by the measure had amounted to just 6,000.

In total the VAT is expected to cost the government two billion in lost revenus.

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