VAT INCREASE PROPOSAL ANGERS FRENCH RESTAURANT OWNERS

It is nearly 3pm and the restaurant is empty. Le Café de Paris is situated in Saint-Maur des Fossés, a well-off suburb in the South East of the French Capital. If customers are absent, it is not only because lunchtime is over, explains the owner Filippo from behind the counter: “business has been quite slow lately”, he adds wearily. And to make things even worse, the French government is now proposing to raise VAT in restaurants from 7% to 12%.

“This is extortion!” Filippo exclaims. When the former President Nicolas Sarkozy lowered VAT from 19,6  to 5,5%, the restaurant owner “played the game fairly and lowered prices on the menu.” The rise in prices of food products has led him to raise his prices since, but not as steadily as the cost-of-living index. “If VAT rises to 12%, I won’t lay off people because I need everyone I have now to run the business, and I won’t raise prices because we are already losing customers. It will all come down to cutting down my profit margin.”

A little further down the street, Jacques also fears the consequences of such a measure. Owner of La Perla Ionica, an Italian restaurant of a hundred covers, he says a rise in VAT “might lead him to fire an employee, or have a full-time job turn into a part-time job.” In 2009, the fall in VAT had allowed him to redecorate his restaurant which had subsequently increased his benefits and allowed him to hire one more employee. Unlike Filippo, Jacques is considering raising prices on the menu: “I try to protect my employees and keep their salaries stable, so if the prices of food go up or VAT rises, It will reflects on the prices of my menu.”

With different ways to cope with an increased Value Added Tax, both restaurant owners are worried about their business and resent President Hollande for proposing such a measure. “I wish the government would come down here and realize what it is really like to own a restaurant, instead of talking at great length about it without knowing what we are going through,” concludes Jacques.  In a context of financial crisis, such a project is met with strong opposition from the restaurant business. And if raising VAT is likely to make French meals more expensive, it will certainly not raise Mr Hollande’s popularity.

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