Restaurant VAT change overruled

A PROPOSAL to axe the cheap rate of VAT for restaurants – forcing them to go back to paying 19.6% again instead of 5.5% - has been rejected by senators.

The Senate’s finance committee put forward the suggestion yesterday, saying restaurants had failed to pass on July’s rate cut to customers.

The committee said the scheme - which is expected to cost about €3bn a year in lost revenue - was out of proportion and could not be justified at a time when France has a massive budget deficit.
In a vote late last night, the Senate decided not to reset the rate to 19.6% in the 2010 budget, which is being discussed in parliament at the moment.

However government spokesman Luc Chatel told Europe 1 this morning that the threat to increase the rate again served as a “warning” to restaurant owners who did not keep their side of the deal.

To benefit from the cut from 19.6% to 5.5%, restaurant and cafe owners were expected to sign up to a contrat d’avenir, agreeing to drop the price of at least seven key menu items.

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

Commerce minister Hervé Novelli said last month that restaurants were not doing enough to pass on a cut in VAT to their customers.

He said price drops had been small and restaurant owners needed to take action by mid-December to make sure they were satisfying their end of the contract.

Restaurant union Synhorcat said it would be wrong to revert to the old rate after just six months.

According to Aujourd'hui en France, Insee research shows restaurant prices fell by 1.46% between July and October. If the VAT cut was passed on to customers in full, the drop should be in the region of 11%.

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Photo: Cancre