French Restaurateurs Angered By EU's VAT Announcement

by Ulrika Lomas, Tax-News.com, Brussels

24 June 2002

It emerged on Thursday that the European Commission has denied a French request to reduce VAT on meals purchased in restaurants to the same level as those bought in fast food outlets.

Currently, meals ordered in sit-down restaurants are taxed at the full 19.6% rate, whereas 'labour intensive' businesses such as fast food chains are only obliged to levy a 5.5% sales tax on their meals.

During President Chirac's re-election campaign, he vowed to lower the VAT rate for France's restaurants, and in early June, the Finance Ministry asked the European Commission for permission to do so.

According to recent reports, however, although the EU's executive body has denied the French request, it has stressed that this does not represent Brussels issuing orders to sovereign states over taxation matters, but is merely the implementation of an agreement which was agreed to unanimously by EU member countries years ago.

Speaking to the Associated Press last week, Spokesman for the European Commission, Jonathon Todd explained that: 'At present, France can't apply a reduced rate of VAT to the restaurant sector.' However, he added that the rules on EU VAT levels are due for review in 2003.

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