France Fails To Gain German Support For Restaurant VAT Cut

by Ulrika Lomas, Tax-News.com, Brussels

11 February 2004

France has failed in its attempt to gain German backing for its proposal to cut VAT on restaurant bills across Europe to 5.5%.

Following a meeting between President Jaques Chirac and Chancellor Gerhard Schroeder near Berlin on Monday, the French Premier announced: "For reasons that we understand perfectly well, both economic and social, this measure is not a priority for Germany."

"As a consequence we have decided to pursue the matter in view of economic developments in this sector in the coming years. France is sticking to its stance."

The French government is particularly keen on the proposal, which would cut the tax from its present rate of 19.6%, as this was one of its election pledges.

Although the European Commission President, Romano Prodi has acknowledged that France’s position has a sound economic justification, he observed in a previous meeting with Prime Minister Jean-Pierre Raffarin 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 items on the list.

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