French Court Clears Soda Tax, VAT Hike

by Ulrika Lomas, Tax-News.com, Brussels

30 December 2011

The French government has received approval from the nation's Constitutional Court to forge ahead with plans to introduce a tax on sugary beverages, and to increase the concessionary value-added tax rate currently in place on some services sectors.

The Court on December 28, 2011, cleared plans for the country to introduce a tax of EUR1 per can of drink with a high sugar content, a decision which has triggered Coca Cola to pull future investment in protest. The tax is expected to contribute around EUR120m (USD155m) annually towards government debt-reduction efforts.

In a second decision, the government also received approval to hike its concessionary value-added tax rate - 5.5% since mid-2009 - introduced to support hoteliers and restaurateurs. Under government austerity plans, this rate is poised to rise to 7% to assuage markets' concerns that the nation's credit rating will be downgraded.

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