Reduced VAT Rate: Only A Third Of French Restaurants Adhere To Agreement

by Ulrika Lomas, Tax-News.com, Brussels

23 July 2009

According to the French government, one in two restaurant owners have now lowered their prices in return for a reduction in VAT, from 19.6% to 5.5%, two weeks after the measure entered into force on July 1.

In reality, however, only a third of all restaurants have complied fully with the terms of their agreement, by both reducing the prices of at least seven of their products, and by displaying the official notice “La TVA baisse, les prix aussi”, or “A cut in VAT is a cut in prices”, Secretary of State for Trade and Services Hervé Novelli explained.

Nevertheless, included in the government’s calculations are the 20% of French establishments that have clearly entered into the spirit of the agreement, by significantly reducing prices on several of their products, even though they have not displayed the poster.

Given the degree of recent scepticism surrounding the non-binding contract, Hervé Novelli referred to the findings as “encouraging”.

Under the terms of the agreement “le contrat d’avenir”, concluded between the government and professional organisations, reastaurant owners pledged to the lower the prices of at least seven products on their menu by 11.8%, in return for the long-awaited reduced VAT rate. Employers have also promised to create 40,000 additional jobs in the sector within two years.

Recommended