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France to make tips paid by card tax free

French President Emmanuel Macron has announced that customer tips in cafés and restaurants will no longer be subject to tax, in an effort to make the industry more attractive to potential employees.

France to make tips paid by card tax free
Photo: RANK PERRY / AFP.

The tax exemption will come into effect “in the coming months”, Macron announced on Monday while visiting the Salon international de la restauration, de l’hôtellerie et de l’alimentation in Lyon.

“The idea is that in a restaurant you can leave a tip with a bank card, rounded up or more, because we’ve seen coming out of the crisis that people are using less and less cash.”

He added that businesses would not need to pay insurance contributions on tips, and employees would not be taxed, thus boosting their spending power.

Macron said the measure was partly a response to complaints from business owners in the hospitality industry that they are unable to find sufficient numbers of staff to fill gaps.

“It’s also what’s going to allow you to attract more people – both young and old – by telling them, you can earn a lot more than the salary and bonuses I’m paying you,” he said.

In June, the President called on job seekers to look towards the restaurant industry, where he said there were 110,000 jobs available which needed filling.

READ ALSO How much should you tip the waiter or waitress in France?

The policy was proposed last week by MP Jean-Noël Barrot from the centrist Modem party. He told Les Echos the measure would make the trade more attractive “at a moment when the restaurant industry is restarting but businesses are running into serious difficulties recruiting, which could restrict the economic recovery”.

Geoffroy Roux de Bézieux, president of employers federation Medef, welcomed the announcement. “With the disappearance of cash, there are fewer and fewer tips,” he told franceinfo earlier this year.

“It’s excellent news, because tips are part of the attractivity of our trade,” Didier Chenet, president of the GNI union representing independent hospitality businesses, told AFP. “But now everyone pays by card or using apps, very often they don’t have any change to add €3 or €5 for the service.”

READ ALSO Terraces to tipping: The etiquette for visiting a French café

Until now, tips paid by card were automatically declared, and therefore taxed, while most waiters do not declare cash tips.

Many visitors to France are surprised to learn that tipping is not considered to be a requirement, since restaurants and cafés already add a 15 percent service charge to the bill, but it is common to leave whatever change is left over when paying by cash.

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MONEY

Reader Question: Why did my French electricity bill increase by more than 4%?

The French government has capped electricity prices rises at four percent - but as with many French rules, there are certain exceptions.

Reader Question: Why did my French electricity bill increase by more than 4%?

Question: I read in the media that electricity prices in France are capped at four percent, but I just got a letter from EDF telling me that my bill is going up by almost 20 percent – is this a mistake?

The French government’s bouclier tarifaire (tariff shield), froze gas prices at 2021 levels and capped electricity price hikes to four percent – it remain in place until at least the end of 2022.

However, there are some customers who will see increases to their bills of more than that – here’s why: 

The regulated tariff rate

The French government involvement in price-setting doesn’t just happen during periods of energy crisis, normally regulated tariff prices are updated twice a year: usually on February 1st and August 1st.

Typically, this value is calculated by the CRE (commission de régulation de l’énergie) and it is based on several different factors, which are explained on this government website. These tariffs proposed by the CRE are then subject to approval by the ministers in charge of energy and the economy.

READ MORE: EXPLAINED: Why are French energy prices capped?

These affect the state-owned Engie (formerly Gaz de France), the mostly state-owned EDF and some local distribution companies. Around 70 percent of people in France get their electricity from EDF but other suppliers do exist in the market.

These alternative suppliers, like Direct-Énergie, Total Spring or Antargaz, are free to charge more – but don’t usually charge much above the EDF rates for obvious commercial reasons.

Basic rate

The government-set limit in price rises refers only to the basic rate (option base) for electricity.

This plan represents over 80 percent of the 32 million households connected to the electricity grid in France. So, there is a good chance you might be subscribed to this without even realising it. 

If you are on the basic tariff rate, your bill will not increase by more than four percent this year.

Other tariff options

However, other options for electricity bills do exist, including off-peak rates, green deals and fixed energy prices for a certain period.

Typically people who sign up for these will have been paying less for their electricity in the preceding months than those on the base rate.

However, there are certain special deals that are not covered by the four percent cap, and some users will find that their deal period has come to an end, they are then shifted onto the base rate – which is likely to represent a price increase for them of more than four percent.

It’s little consolation when faced with rising bills, but you will likely have been paying significantly less than customers who have been in the base rate for the past few years.

READ MORE: French government to continue energy price freeze until at least 2023

Kilowatt price

Because most electricity price plans are bafflingly complicated, the easiest way to compare is to look at the price per kilowatt-hour.

Your electricity bill consists of a fixed part, the monthly subscription (abonnement) and the variable part, which depends on the quantity of electricity consumed (in euro per kilowatt-hour, kWh). The latter part is what is concerned by the tariff shield of four percent.

Here is an example of what that might look like:

The mid-August base rate price per kilowatt-hour is €0.1740/ kWh, so if you’re with EDF they cannot charge you more than this rate.

Other EDF plans charge significantly less than that – for example the Vert Electrique Weekend deal has been charging €0.1080/kWh on weekends and €0.1434/kWh on weekdays. 

Bill rises

With the tariff shield, the average resident customer on the base rate will see a €38 rise on their bill this year, while professional customers will see an average of €60 rise. 

Without the tariff shield, electricity prices per residential (non-business) customer would likely have increased an average of €330 a year, according to the CRE.

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