No going back on resto VAT deal

PRESIDENT Sarkozy has ruled out any changes to the preferential VAT rate paid by French restaurants, arguing that the scheme has been a success.

Speaking on the second anniversary of the agreement, Sarkozy said the "promises had been kept" by restaurant-owners to employ more staff in return for a drop in VAT from 19.6% to 5.5%.

The number of staff employed in the restaurant and hotel industry has risen by almost 45,000 in the past two years - although some unions claim many of the extra posts are temporary or part-time.

The tax break for restaurants has been controversial, with consumer groups complaining that the savings are not being passed on to diners.

A report by the Cour des Comptes public spending watchdog last autumn called for the scheme to be reconsidered.

It said the VAT cut was costing the state too much, about €3bn a year, in lost revenue and recommended that the rate applied to restaurants be increased to 10 or 12% - half way between the current and previous rate.