Brussels Challenges France Over Telecoms Tax

by Ulrika Lomas, Tax-News.com, Brussels

02 February 2010

The European Commission has initiated an infringement procedure against France relating to the 'telecoms tax' on telecommunications operators.

In a bid to finance the controversial ban on advertising on public television (France Télévisions), the French government has introduced a specific tax on the turnover of telecommunications operators in connection with their licence to provide telecoms services (including Internet and mobile phone services).

The Commission has ruled however, that in reality this tax constitutes an administrative charge that is incompatible with European law.

“I have expressed doubts about the 'telecoms tax' on a number of occasions”, announced Viviane Reding, the Member of the European Commission responsible for the information society and media.

She continued: “Not only does this new tax on operators seem incompatible with the European rules, it also concerns a sector that is now one of the major drivers of economic growth. Moreover, there is a serious risk that it will be passed on to customers at a time when we are in fact trying to reduce their bills by cutting termination rates and the costs of mobile phone calls, data transfer and text message roaming”.

The French tax on telecommunications operators was introduced by means of Law number 2009-258 of March 5, 2009 on audiovisual communication and the new public television service. It concerns the ending of advertising on public television channels and introduces a tax on the turnover of telecommunications operators to make up for the loss of revenue from advertising on public channels (as well as a tax on the advertising revenue of private channels). The annual revenue for the government arising from the new tax is estimated at around EUR400m.

This tax is payable by telecommunications operators which, in accordance with the French Telecoms Law, provide a service in France and have been the subject of a prior declaration to the French telecoms regulatory authority. According to European rules, an administrative charge levied in this connection can only cover certain costs specified in them (relating mainly to licensing and regulation).

The European Commission takes the view that the telecoms tax does not comply with the conditions laid down in the Community telecoms rules.

As a result of the ruling, the French government now has two months to reply to the letter of formal notice issued by the Commission. Failure to reply or to present satisfactory observations will mean that the Commission may then issue a reasoned opinion (the second stage in an infringement procedure). If, after that, France still fails to fulfil its obligations under EU law, the Commission can refer the case to the European Court of Justice.

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