European Commission Behind France On VAT Reductions

by Ulrika Lomas, Tax-News.com, Brussels

18 September 2002

French Prime Minister, Jean-Pierre Raffarin met with European Commission President, Romano Prodi for the first time on Monday, and pleaded the government's case for the reduction of VAT on restaurant services and cultural products.

Speaking at a press conference following the meeting, Mr Prodi announced that: 'Present Community legislation does not allow reduced VAT rates to be applied to the catering and cultural goods sectors.'

However, he added that: 'In 2003 we will undertake an overall review of reduced VAT rates. The issue of labour-intensive services will be given consideration. In this connection, the Commission has no objection in principle to putting restaurants on the list submitted to the Council.'

Although he observed that the principle of unanimity (whereby the list of products subject to reduced VAT must be approved and adopted by all EU member states at the same time) could make it difficult to include new areas on the list, Mr Prodi noted that the French request has a sound economic justification in terms of employment within the aforementioned sectors.

The French government is keen to address the topic of VAT reductions as soon as possible, as revising the sales tax down was one of its election pledges.

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