The European Commission (EC) has accepted the French government’s principle of large VAT tax cuts on restaurant meals in France, to be implemented early in 2004, although the tax cut is unlikely to make subsequent restaurant meals any cheaper.

The EC has been sold the tax cuts by the French government on the basis that the cuts would boost both tourism and economy figures for the country. The change in the EC tax rules will mean that restaurant meals can be put at the lowest tax rate – 5.5 per cent instead of the current 19.6 per cent.

However, instead of the customer reaping any potential benefit from the VAT cuts, many restaurants in France will be using the tax cut solely to keep afloat or solidify their business foundations because of the falling figures in those dining out due to the current French economic downturn.

While the VAT cut has been agreed upon in principle by the EC, the proposed changes also need to be approved by all the EU governments at their autumn session.

If approval is reached and VAT cuts are imposed, the French government’s annual income could potentially be reduced by approximately £2bn, but could result in the creation of 40,000 jobs within the first 18 months of the cuts beginning. Details: europa.eu.int