Business News

Going on Holiday? French Food Just Getting Cheaper

Holidaying in France has suddenly become even more attractive for tourists planning a cultural break in the capital or some sun-bathing time on the Riviera: restaurant and bar bills are likely to fall substantially, according to some analysts.

Starting on July 1, the value-added tax rate for restaurants and bars is being cut to 5.5 percent from 19.6 percent.

And since eating out represents a large chunk of a normal day in France, the impact is likely to be significant.

"We have been fighting for this measure for the past 15 years", said Christine Pujol, president of the French Hotel and Restaurant Association.

The Eiffel Tower is seen from the Trocadero in Paris, France, Thursday, March 12, 2009. (AP Photo/Muhammed Muheisen)
Muhammed Muheisen

Pujol said she expects the measure to encourage locals and tourists to spend more money, hopefully boosting the industry that is one of the largest employers in France. Around 180,000 restaurants employ about 600,000 people.

The cost to the public finances was forecasted to be around 3.25 billion euros ($4.55 billion) a year and, in times of austerity, the move could seem a biased way to stimulate the economy by favoring a sector which is traditionally right wing.

The real effectiveness of the measure has also yet to be proved as restaurants and bars have no legal obligation to pass on the tax cut to customers.

But supporters are adamant the measure will bring benefits in the medium term.

"The loss of fiscal revenue will be compensated by our commitment to create 40,000 new jobs by 2011," Pujol said.

Along the VAT cuts, cheaper roaming charges on mobiles across Europe and a slightly weaker euro versus the dollar and pound compared with last year add to France's hopes that its recipe for attracting more tourists will prove successful.

— Written by Angelina Rascouet