Senate rejects move to end VAT discount for restaurants

France’s VAT rate on the restaurant industry will remain at 5,5% after senators rejected an amendment that proposed to bring it back to 19,6%.

Heeding the government’s call, the Senate, which is largely controlled by the ruling UMP party, rejected the amendment by 203 votes against 126. Only the opposition Socialists and a few centrists supported the amendment. 

“The (catering) industry must make an effort in terms of prices," acknowledged France's secretary of state for trade, Hervé Novelli. "But we cannot scrap a contract that has just been agreed with the industry’s trade bodies."

The Senate’s finance committee had earlier unanimously adopted an amendment in favour of restoring the VAT rate to 19,6% in cafés, brasseries and bistros. The rejected amendment was seen as a warning to members of the catering industry who have failed to keep a promise to pass the VAT cut on to customers' bills.

The French government slashed the VAT rate in July of this year after securing the industry's pledge to lower prices and hire more staff. France's catering sector has been hit hard by the economic crisis.

"Customers have not seen any real price change in restaurants", read the proposed amendment, adding that the VAT drop was “not justified in the current, difficult budgetary situation”.