French Restaurant Tax Drops in Bid to Lure Diners

A man drinks at a cafe where prices were modified, Wednesday July 1, 2009 in Paris. France's...

A man drinks at a cafe where prices were modified, Wednesday July 1, 2009 in Paris. France's restaurant bills could start looking a little slimmer thanks to a nearly fourfold drop in sales taxes. The measure allowing a reduction of VAT, or value-added tax, from 19.6 percent to 5.5 percent went into effect Wednesday.(AP Photo/Jacques Brinon)

(AP)

French restaurant bills slimmed down slightly Wednesday, after the government slashed value-added tax hoping to nudge people back toward sidewalk cafes and prized restaurants suffering from the economic downturn.

Yet at tables in Paris, it was business as usual. Although happy to learn they may pay less, customers said the reduction in value-added tax from 19.6 percent to 5.5 percent wouldn't change their dining habits.

French President Nicolas Sarkozy made an election pledge two years ago to reduce VAT on restaurants in hopes it would stoke growth across the economy by encouraging people to eat out more and restaurants to expand and hire more personnel.

Sitting at a terrace of Le President Cafe, a short block from the Champs-Elysees, Robert Curley Jr. who splits his time between New York and Paris, was meeting Alain Poirier for an English lesson over coffee.

"I dine out a lot, at least three times a week," Curley said. "My lifestyle is like that, I don't think the price will make any difference."

His student, a bank employee who works in the neighborhood, agreed.

"I consider that the difference is too little to have an importance," Poirier said. He noted that while some items on the menu at Le President had been reduced, others hadn't and customers wouldn't necessarily know the cost until they got the bill.

Restaurant owners had pushed for the cut for a decade, hoping it would bring people back to sit-down restaurants and away from fast-food places that have lower taxes and prices. France's restaurants have also suffered from lower business recently amid France's worst recession in 30 years. A ban on smoking in restaurants that went into effect last year also had cafe owners worried about losing clients.

The VAT reduction won long-awaited European Union approval earlier this year, and went into effect Wednesday.

It is up to businesses to decide whether to apply the lower tax rate. French restaurant taxes are already incorporated into the menu price, not added onto the bill at the end.