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Will France Go Through With VAT Increase?

  • Nov 18, 2013 | Gail Cole

 Peaceful Brittany was recently rocked by tax protests.

France’s value added tax (VAT) is set to increase by 0.4 % on January 1, 2014. Not surprisingly, the French are in no mood. Regional prefects have reportedly “described French society as ‘increasingly tense, exasperated and angry,’ with much of the anger focused on tax increases.”*

Will President Francois Hollande’s government go through with the VAT increase? The imposition of an ecotax created to encourage the use of more environmentally friendly commercial transport in France has been suspended due to its unpopularity. Plans for two other taxes have also been put on hold. Unappeased, protesters are planning to hold a large rally at the end of the month.

Take one for the team

Rather than table the VAT increase, French Finance Minister Pierre Moscovici is asking the country’s retail chains to “not raise their prices” to account for the increased tax (Yahoo Finance).

M. Moscovici told RTL radio, “Nobody has to reflect this (VAT hike) in their prices. I think it’s important to show virtuous behavior, notably in the retail sector which along with the French people must display a civic spirit.” The retailers of France have not yet responded to this suggestion.

Civic spirit is one thing. The bottom line is another. Business leaders are saying that the VAT increase “will unfairly penalize them.”

Horses protest

Retailers aren't the only ones concerned about the proposed tax hike. Roughly 4,000 people and 200 horses and ponies took to the streets of Paris on November 11 to protest a proposed VAT increase on riding schools--set to jump from 7% to 20% on January 1, 2014. Many of them (people and horses alike) wore red berets to signal their tax protest.

Serge Lecomte, president of the French Equestrian Federation, said that 6,000 jobs could be lost, which he says is, "more than the redundancy schemes of some big companies we hear about which politicians are concerned about."

Revenue shortfall

Unpopular though the VAT increases may be, the French government will most likely not back away from them. According to French Budget Minister Bernard Cazeneuve, there is currently in France  a "1 billion euro shortfall on value-added taxes and a 4 billion shortfall on corporate taxes, which are particularly sensitive to the economic cycles."

Is your business going global? Why not automate VAT?

* Read about the leaked report that provided this information in Le Figaro.

photo credit: cathy breizh via photopin cc

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.