France COVID-19 VAT rate cut
- Aug 9, 2020 | Richard Asquith
France is considering a Value Added Tax rate cut as part of a €100 billion investment package to boost its economy as it comes out of the coronavirus health crisis. The plans will be detailed in the first week of September 2020.
France has introduced limited VAT measures to help businesses cope with the pandemic. This includes very limited delays on repayments of VAT. Most other countries have introduced COVID-19 VAT measures. Germany has temporarily cut VAT to 16% and Ireland is reducing its VAT rate to 21%. The UK cut hospitality VAT from 20% to 5%.
France may only opt for a cut in hospitality and tourism VAT. However, many of these services already enjoy the reduced VAT rates of 5.5% and 10%.
France cut VAT on restaurants in 2009 from 19.6% (the standard VAT rate at the time) to 5.5%. Some 185,000 restaurants, bars and cafés was supposed to reduce prices substantially, raise staff wages and create 40,000 jobs. None of those has materialised but the government lost €2.4bn in revenue in a full fiscal year from the cut. Restaurant prices fell by only 1.46 per cent in the four months following the introduction of the cut on July 1 2009.
