'VAT rate cut has saved restaurants'
Report claims 25,000 restaurants had risked financial collapse if the cut from 19.6% to 5.5% had not been passed
SOME 25,000 restaurants have been saved from closure following last July's cut in VAT, a new report has claimed.
The study by Gira Conseil, published nine months after the cut from 19.6% to 5.5% came into force, found the tax break had limited the number of restaurateurs filing for insolvency and boosted restaurant takings.
The restaurant sector's turnover grew by 11.8% last year, according to the study.
It said about a third of France's 80,000 restaurants had risked financial collapse if the measure had not been passed.
The number of restaurants entering administration or going bust rose by 1.35% last year - compared with a 4.85% across all sectors of French business.
To benefit from the cut, restaurant and cafe owners were supposed to sign a contract agreeing to drop the price of at least seven key menu items and improve staff pay and access to training.
Soon after the tax break came into force, consumer groups complained that the restaurants were failing to pass any of the rate cut on to customers in the form of lower prices.
National statistics body Insee says prices in restaurants have fallen by about 1.5% - which suggests the tax cut is not benefitting customers enough.
The main restaurant unions signed a deal in December promising to keep their side of the deal or risk losing the €3bn incentive altogether.
Commerce Minister Hervé Novelli published separate figures last night, saying cafés, hotels and restaurants had created 5,300 jobs in the second half of 2009, since the VAT cut came into force.
Restaurant union SNRTC said the VAT drop had "undeniably helped businesses and saved some of them" after the sector saw revenues fall by up to 25% in 2008.
