Restaurant VAT cut to stay

THE GOVERNMENT has refused to scrap a controversial tax break for restaurants, described by one consumer group as a “proven failure”.

The VAT rate cut from 19.6% to 5.5%, which came into force a year ago, has allowed restaurants to employ more staff, but the price cut has not been passed on to consumers, says the national statistics body, Insee.

The group found that the restaurant sector appeared to have kept its promise to create new jobs, with 21,700 new posts declared to social contributions body Urssaf in a year.

The figure has been contested by the Force Ouvrière workers’ union, which says many of the jobs were because of seasonal fluctuations in demand, not permanent new positions.

However, fewer than half of restaurants have dropped their prices. The average decline from those that passed the cut on to consumers was 1.3%, short of the 3% target set by the government when the scheme came into force last July.

Consumer rights group CLCV has called for the tax break to be scrapped completely because it has failed. Some 61% of people in a recent poll agreed.

The government is looking to cut a number of tax breaks to save money, but it has ruled out making the e3bn-a-year restaurant VAT deal one of them.

Finance minister Christine Lagarde said progress had been made with three restaurant unions to improve staff pay, training and holidays. However she agreed that it was wrong that so few restaurants had dropped prices.