Berlusconi Enforces Controversial Broadcasting Tax

by Ulrika Lomas, Tax-News.com, Brussels

03 December 2008

Silvio Berlusconi, Italian Prime Minister and media tycoon, has been criticised over a decision to double VAT tax on pay-TV subscriptions from 10% to 20%.

The proposal forms part of the government's ‘anti-crisis’ package announced on Friday, November 28. The move has sparked criticism from Sky Italia who believe the move will benefit Berlusconi's broadcasting company Mediaset.

Berlusconi, who spoke recently on the issue, said Sky had been "unduly favoured" by previous left-wing governments, with which it had enjoyed a "privileged" relationship - until now, pay-TV subscribers have reaped the benefits of a reduced VAT rate of 10%, but on Friday the cabinet decided to remove the tax break thus restoring VAT to 20%.

The Italian Prime Minister vehemently denies alternative motives for the hike, but has been subject to a storm of protests nevertheless. Sky Italia, the main competitor to Mediaset, believes there was a conflict of interest when the government formulated the tax hike. However, Berlusconi argues that the measure would affect both Sky Italia and Mediaset equally.

Also announced this week were the government's plans to enforce a tax on pornographic material, an initiative which was first proposed in 2005. The government will charge a tax of 25% on earnings from the production and distribution of all pornographic materials, although the government has not released details of the logistics. The tax comes into effect immediately and therefore applies to earnings from 2008.

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