The European Commission denied a newspaper report today that it would propose member states such as France be allowed to cut sales tax on restaurants that do not face cross-border competition.
A spokeswoman for European Tax and Customs Commissioner said the European Union executive had long been prepared to accept lower VAT on restaurants but that it required unanimous agreement of EU member states, which France had repeatedly failed to win.
She also said ideas aired by some French ministers and politicians for selectively raising VAT on goods produced mainly abroad to finance a cut in labour costs at home would probably violate EU law by discriminating among goods.
Business daily La Tribunedaily said a plan drawn up by EU was expected to be adopted by the full European Commission on July 4th or 10th.
However, the spokeswoman said the commission would only adopt a report on the economic impact of existing reduced-rate VAT provisions in sectors such as home repairs or bicycle repairs.
France has long fought for the right to levy value-added tax on restaurant bills at 5.5 per cent rather than the 19.6 per cent that it charges on most other goods.
President Nicolas Sarkozy, elected last month, made reduced restaurant VAT a campaign pledge.