Restaurant tax may be cut

[Fat Guy]

Dow Jones reported today that the full-service restaurant VAT is likely to be cut EU-wide from 19.6 percent to 5.5 percent in January 2004.

[Busboy]

That's too late -- I need it cut by next Saturday, to make up for the slide in the dollar against the Euro.

[Bux]

Reported earlier in another thread

By the way it looks like restaurants in France will have the same 5.5% VAT as Macdonald's starting in Janauary. Do you belive the restaurants will pass on the savings?

To which I replied:

I think we'll be lucky if the savings is reflected in a slightly longer period without a rise in prices. I'm not an optimist about savings being passed on to the consumer. As I recall the VAT for "better" restaurants was 19.6%. It would be criminal not to see a 10% reduction in the price listed on menus.

Restaurateurs have been arguing that the tax is hurting fine dining in France and in spite of my pessimism, I think they will have to pass on the savings to diners, although I suppose they will also argue that they've been shaving their profits just to stay in business and we'll see a split of the tax savings. It will be interesting to see how things work out. It's over six months away. Meanwhile France is getting terrific comeptition from Spain from those who travel to eat.

Having just returned from Spain (Rioja, San Sebastian, Navarra and Madrid) after a sixteen day vacation and at least ten extraordinary meals, there is no doubt in my mind that Spanish chefs are in the forefront of a culinary revolution and that Spain has become an obligatory destination for anyone whose primary interest is food and wine.

...

One last point which we appreciate on every visit to Spain. The mark-up on wines in restaurants is very reasonable and we  enjoyed a superb wine with every meal without the sticker shock that hits us almost every time we eat out in New York or elsewhere in the US.

[robert brown]

I like the way Alain Passard (Restaurant L'Arpege) does business. On top of what was (and still is) the most expensive special chef's tasting menu of 300 euros, he has chosen, in the face of a huge drop-off in American clientele and a 17% drop in the dollar since it was around 1/1 with the Euro seven months ago, to add 20 euros on to the price of the menu.

This may be an isolated instance, but is indicative of how the French think when they do business. It's like the guys I do business with: When they sell somethng they quote in dollars at a time the dollar's in the crapper, they say that they have to charge more. But when it's the franc or the euro that's weak and they love being paid in dollars, do you think they offer a discount? Not in a million years. That's one reason I enjoy being in France increasingly less. Don't count on seeing a substantial VAT reduction in food end up in your pocket. Bux has it right. The diner will get to keep half for a while. I say one year maximum. All my advance restaurant planning for the summer is for Catalunia and the Spanish Basque country.

[dallardice]

Dow Jones reported today that the full-service restaurant VAT is likely to be cut EU-wide from 19.6 percent to 5.5 percent in January 2004.

We don't have harmonised taxation in the EU: for example, UK restaurant VAT is 17.5%, Italy is 10% and Spain is 7%. Only France of the major countries is as high as 19.6%. So the size of the cut relates only to France. The recent draft EU constitution explicitly excluded tax harmonisation as a short- or medium-term goal.

[Fat Guy]

Interesting. The way Dow Jones reported it, the EU has to approve the cut.

[Jonathan Day]

I believe that Brussels (EU HQ) can cajole and recommend, but that individual countries implement their own tax structures. A major issue in the EU right now, for example, is the wide spread in social taxes; this is leading a noticeable number of French small businesses to cross the channel and relocate to the UK.

[Fat Guy]

What it says on the Dow Jones newswire is: "The EU Commission has agreed with the cut, say people close to the situation. However, finance ministers from the 15 member countries still must give final approval."