French Senators Rule Out Return To 19.6% VAT Rate In Catering Industry

by Ulrika Lomas, Tax-News.com, Brussels

26 November 2009

The French Senate has rejected an amendment to the 2010 budget bill which would have reverted the reduced value-added tax (VAT) rate applied to the catering industry, to the standard rate of 19.6% - just six months after the long-awaited 5.5% rate was finally introduced in France.

Put forward by Senator Jean-Jacques Jégou, the amendment had been unanimously adopted by the Senate Finance Commission, eager to issue a warning to French restauranteurs that they were not meeting the obligations contained in their agreement (le contrat d’avenir). In the plenary meeting, however, the amendment was eventually rejected by 203 votes to 126.

Under the terms of the agreement concluded between the government and professional organizations, restaurant owners pledged to lower the prices of at least seven products on their menu by 11.8% in return for the reduced VAT rate. Employers had also promised to create 40,000 additional jobs in the sector within two years, and to negotiate a rise in wages.

French Finance Minister Christine Lagarde has urged senators to wait until December 15 before taking further action, the date when the monitoring committee is due to meet.

Referring to the delicate negotiations currently taking place regarding wage increases in the industry, Secretary of State for Trade and Services, Hervé Novelli has also called for patience.

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