France is set to increase the rate of VAT that restaurants and hotels pay on food and accommodation sales to 10% in 2014.
The news came as the country tried to raise more tax and cut public spending in order to fund tax credits for firms that keep jobs in France.
Restaurant and hotels incur France's middle rate of VAT which currently stands at 7%, having previously been at 5%.
The rise, combined with increases in the standard rate of VAT in other European countries, strikes a blow to the campaign to reduce VAT in the UK. The British Hospitality Association (BHA) is currently calling for a reduction in VAT to 5% for accommodation and attractions, while Jacques Borel's VAT Club is calling for a wider cut to 5% for the hospitality in general.
Research by the BHA has shown that a cut in the rate for accommodation and attractions could generate an extra 79,000 jobs - a large proportion of which will go to younger workers at a time when one in five 16- to 24-year-olds is out of work.
It would also contribute an additional £2.6b to the Exchequer over the next decade.
The increase in France's middle rate of VAT, which will also see a rise in the standard rate from 19.6% to 20%, will take place from 1 January 2014.
By Neil Gerrard
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