France calls EU talks on restaurant tax

PARIS, Dec 9 (AFP) – French Prime Minister Jean-Pierre Raffarin on Tuesday called for an extraordinary meeting of EU finance ministers to discuss bringing sales tax in restaurants down to 5.5 percent.

But there was no early indication when or if such a meeting would be scheduled. A European Commission spokesman in Brussels said Germany was opposed to such a measure, and Italy, which currently holds the rotating EU presidency, said it was not in a position to respond right away.

Raffarin’s bid stems from an election promise to bring restaurant sales tax, or value added tax (VAT), for sit-down restaurant meals in France down to 5.5 percent from the current 19.6 percent — one of the highest rates in the European Union.

French restaurateurs held protests in early 2002 to press their demand for the cut, even at one occupying the top of the Arc de Triomphe and unfurling a banner declaring a tax “strike”.

Many started illegally levying the 5.5 percent rate rather than the 19.6 percent, complaining that fast-food joints such as McDonald’s already got away with the lesser VAT for their take-away fare and that the difference was putting them out of business.

Raffarin, whose centre-right government won June 2002 elections, vowed to bring the rate down, and he set about having the cut enshrined in the 2004 budget.

But, although the European Union does not have standardised tax rates, any changes to VAT have to go through the EU approval process — thus the call for the finance ministers’ meeting.

The matter will become more important from January 1 next year because that date marks the end of a four-year experiment implemented by the European Commission which allowed a lower VAT rate on employment-intense sectors such as restaurants and building services.

Germany fears that allowing France to lower VAT to 5.5 percent in restaurants will put it under pressure to do likewise. Both countries are having difficulties plugging budget deficits that have put them in violation of the rules underpinning the euro.

A source in Raffarin’s office said the “very good rapport between France and Germany should convince the chancellor (Gerhard Schroeder) that this would be a good measure for all restaurateurs.”

Subject: French news