About VAT

[macrosan]

The Economist this week tells me that the VAT rate on restaurant food is 19.6% whilst only 5.5% on take-away food. For a country that is allege to be the world leader in restaurant gastronomy, that seems at the very least inequitable

But help is at hand,. Jacques Chirac has promised to lower the VAT rate on restaurants. Well, half- promised, according to The Economist, but that's about as much as anyone could expect of Chirac, I suppose

"A lobby group of big restaurant owners", according to The Economist, has pledged they will cut their prices by 5% "and raise the salaries of their waiters and washers-up by 10%" if the VAT rate is cut. That strikes me as a superb way to allocate the saving, perhaps creating a precedent for proper wage levels for restaurant staff around the world.

[delights]

Macrosan,by his topic was completely right in asserting the VAT to be reduced for the food restaurants.

I think that the employment would be better in this sector.

But more generally the rate of the VAT for some products

is stupid.

For instance you buy a dark chocolate tablet of 100gs the

VAT is 5,5%

You buy a milk chocolate tablet of 100g and the VAT is 19,6%

In the second case this would be a luxury product?

And the foie gras!

A good foie gras is rather expensive.

Nevertheless the VAT rate is 5,5%

And the Caviar?

Without mistake of myself,the VAT rate is 5,5%

Is it for us a daily product?

And others!

Some governments could reform this if they were courageous.

Till now nothing happened!

Personnally I would agree for the creation of a middle VAT

between 5,5% and 19,6%,for instance for the wine.

I sincerely hope that it will change for the restaurants in 2004 as President Chirac said

[Steve Plotnicki]

If I might ask a silly question, what do they do with all of that VAT money?

[Tonyfinch]

I don't know about France but in the UK VAT isn't "hypothecated" (ie specifically targetted). It just goes in the general taxation pot. VAT is the main weapon in any Government's drive to keep income tax rates relatively low in order to ensure that it doesn't alienate those on higher incomes.

[balex]

I don't know about France but in the UK VAT isn't "hypothecated" (ie specifically targetted). It just goes in the general taxation pot. VAT is the main weapon in any Government's drive to keep income tax rates relatively low in order to ensure that it doesn't alienate those on higher incomes.

Exactly. This is the major disadvantage of VAT (or sales tax in general): it is basically regressive since the poor spend all their income, while the rich spend only a fraction. The other disadvantage is that it is difficult to collect on services which encourages the growth of the black economy in areas like building, window cleaning and so on.

On the plus side it is a tax on consumption not on earning, so it encourages saving. Which could be a good thing in England and America.

[Bux]

My understanding of the VAT in Europe in general is that it serves in much the same way as our income tax. Just as our graduated income tax is supposed to place the burden on the wealthy, the VAT is supposed to hit those with greater disposable income as they spend more money, but unlike an income tax it encourages people to save money rather than spend it. Well those are the theories of those who propose the taxes. In reality you can easily poke holes in any tax plan.

The details often give lie to the theory or should I say rationalization. The tax on average bistro food has often seemed punitive to me. Maybe at the stratospheric three star prices another twenty percent doesn't mean much, but my guess is that it hurts the small restaurants who are just above the five and a half erpcent cut off.

[Bux]

I've just read Marcosan's topic starter and believe we are better served by one topic on VAT, so I've merged the two topics. I trust Philippe and the rest of you will understand if not agree.

[Tonyfinch]

No Balex is right. The only way not to get hit by VAT is not to spend. Since the less well off have spend a higher proportion of their income on goods and services they are disproportinately hit.

[Bux]

No Balex is right. The only way not to get hit by VAT is not to spend. Since the less well off have spend a higher proportion of their income on goods and services they are disproportinately hit.

"No" to me? You're quite right. Although the rich spend more, and more on the higher taxed luxury good and thus contribute more of the gross tax figure, they don't spend more as well and pay tax on less of a percentage of their income and this untaxed money may be invested and bring more worth. Thus those earning just enough to make ends meet will never be getter off and those with excess income will continue to amass a greater share fo the wealth. The argument here (which I should note I do not subscribe to) is that this investment will help the economy. In fact, not much trickled down in our trickle down economy.

[macrosan]

I hadn't intended to start a political discussion on taxation What I found interesting in the report were two things. Firstly the different application of two such hugely disparate rates of VAT (5.5% and 19.6%) on food in a country where eating out is such an established part of the social fabric. And secondly, the idea that a tax reduction might be "spent" by restaurateurs principally on increasing the wages of their low-paid staff.