France rejects VAT reversal
Wednesday November 25, 2009
French officials have rejected a proposal to abolish the cheap rate of VAT for restaurants.
The senate’s finance committee suggested that VAT for restaurants should be reverted from the current 5.5 per cent back to 19.6 per cent because establishments have failed to pass the rate cute on to customers. The suggestion was subsequently rejected by senators.
In a vote of 203 against versus 126 for, senators disagreed with the committee’s assertion that the scheme, which is expected to cost about three billion euros a year in lost revenues, is out of proportion and unjustifiable in the current economic climate.
Government spokesperson Luc Chatel told Europe 1 that the potential threat of a VAT rate increase should serve as a warning to restaurant owners to pass on reduced prices on to their customers.
The VAT rate reduction was introduced earlier this year in July and requires restaurant and cafe owners to reduce the prices of at least seven key menu items.