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French Ministers Oppose Hotel Tax Increase

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French ministers have attacked proposals to increase taxes on hotel stays and called for them to be scrapped as they could undermine plans to boost the tourism sector.

France, whose economy came to a standstill in the first quarter, has made tourism one of its priorities. The sector accounts for more than 7 percent of the country's gross domestic product and employs two million people directly or indirectly.

An amendment to France's draft budget this week raised maximum hotel taxes to EUR€8 (USD$11) from €1.50 previously in a bid to bring them more into line with other European cities including Berlin, Rome and Brussels.

Another of the parliamentary proposals - which have yet to be approved - would create an additional tax of €2 per night for hotels in the Ile-de-France region, which includes Paris, to fund public transport.

"We want the Parliament to reconsider its decision," French Economy Minister Arnaud Montebourg told BFMTV channel.

In a statement, the foreign affairs ministry called the tax increases dangerous for the promotion of tourism and said Foreign Affairs Minister Laurent Fabius considered it "imperative" that the proposed increases be scrapped.

With 83 million international visitors in 2012, France was ranked the world's number one tourist destination ahead of the United States and Spain, according to the United Nations World Tourism Organization (UNWTO). But it only ranked third in terms of receipts behind the same two countries at USD$54 billion.

Sebastien Bazin, chief executive of Europe's largest hotel group Accor, told Journal du Dimanche weekly the new taxes would cut hotel margins severely and penalize tourism.

"These decisions are unjust, unsustainable and dangerous," he said in a posting on the weekly's website on Saturday evening.

"The impact on company margins and France as a touristic destination will be very negative," he said.

The new €2 tax in Ile-de-France would amount to a loss in earnings of EUR€20 millions, Bazin said. The impact of a rise in maximum city taxes would be calculated next week.

(Reuters)