French restaurant tax cut debated

By Caroline Wyatt
BBC News, Paris

Restaurateurs say high tax rates hurt business

EU tax experts are meeting in Brussels on Thursday to discuss France's demand to be allowed to cut value added tax (VAT) on restaurant meals.

President Jacques Chirac has long promised to bring restaurant VAT - currently at 19.6% - in line with the 5.5% charged at fast-food outlets.

But EU officials have warned that tax decisions must be agreed unanimously.

The issue has gained new urgency as the French prepare to vote on the EU constitution this month.

Food and drink are virtually a national religion in France, so lowering taxes on meals in cafes and restaurants would go down extremely well here - with restaurant owners and customers alike.

No coincidence

During the last election campaign, Mr Chirac promised he would slash VAT on restaurant meals, to provide a boost for this crucial sector of the economy.

But that has not happened yet because under EU rules, France first needs the unanimous agreement of the rest of the 25-nation EU.

Many believe it is no coincidence that President Chirac and his government have suddenly upped the pressure on the issue.

Some suggest that such a move could prove a vital sweetener for the French, and might make restaurant owners look more favourably on the EU constitution when they vote in the referendum at the end of this month.

Denmark, Sweden and Germany are apparently still reluctant to allow France this particular tax exception - fearing that restaurateurs in their own countries will make the same demand.

But the French government would argue that it is a small price to pay to persuade the French to swallow their doubts about the EU constitution and vote yes.