Taxes (TVA) for cafés and restaurants in France were lowered at the beginning of this summer (2009) from 19.6% to 5.5%. The lower TVA was finally done, at the insistence of the café-restaurant owners to "allow them to have lower prices, attract more customers and be more competitive".
We were in Paris a month or so ago, just after the lowered-TVA law came into effect. There were immediate studies by newspapers and other more official organizations to determine how many, and which, establishments actually passed the lowered taxes on to the customers in the form of lowered prices.
Results were mixed, but it seemed that many, if not most, cafés and restaurants did lower their prices. If not by the full tax-reduction amount, at least enough to be interesting to the clients.
That was, of course, in Paris, where competition is a consideration.
An article in this morning's local paper (4 August 2009) described the results of a study of the café-restaurant tax-reduction effect in Grasse, the perfume capital of the world. Results: TVA reduced, prices steady. With only a very few exceptions, the excuse of the Grasse cafés and restaurants is: (paraphrased, of course) "we're going to wait until the tourist season is finished to see what effect the lowered TVA has before we lower our prices".
This Gallic logic seems a bit self-serving to us.
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