PARIS, France (eTN) – As the French economy is bracing for weak growth or even a recession, the government is confronted with a fall of its revenues and its inability to cut the state’s deficit. Any idea to pump up money seems good, and tourism is – as usual – is seen as an easy money-spinner to fill up treasury coffers.
The French government first mulled out the great idea to increase VAT on entertainment parks, raising it from its current 5.5% to 19.6%. The measure was to bring in € 90 million (US$117 million). But protests from local politicians – including a former Prime Minister – forced the French government to back down and finally abandon the idea. Then came the second thought of imposing a 2% tax on luxury hotels.
The new taxation is especially rejected by all professionals in the hotel and tourism industry as it follows a recent re-classification of French hotels by the France Ministry of Tourism. In the past, excessive taxation for luxury properties – especially five-star hotels – was bypassed by hoteliers by downgrading their classification. France was then among the few countries around the world without five-star hotels but “four-star deluxe” properties! The recent upgrading of hotels to four- and five-star properties had been achieved to reflect their real standards of comfort and services and attract a more affluent crowd of foreign travelers. Atout France (France’s tourism promotion agency) Managing Director Christian Mantéi was the first to condemn the new taxation. In a local hotel magazine, Mantéi indicated feeling worried that the new 2% tax would stop the recovery of international markets towards the luxury hotel segment.
Adopted yesterday in Parliament, the new tax will finally affect all hotels with prices over € 200. Instead of being taxed at 5.5%, rooms – excluding breakfast – will now be taxed at the new rate of 7.5%. And as a bad surprise for travelers, it will enter into application from November 1, 2011. Unfortunately, the French government does what most governments think about tourism around the world: it is easier to tax visitors as they do not represent a potential voter’s force.