Controversial Taxes To Finance French Public Broadcasting Reform

by Ulrika Lomas, Tax-News.com, Brussels

12 January 2009

As the French Senate began its examination earlier this week of President Nicolas Sarkozy’s much-trumpeted reform of public broadcasting, to be funded by two highly controversial taxes, employees from two of the four state-funded channels affected by the shake-up, France 3 and France 2, have begun their strike in protest.

Designed to improve the overall quality of programming by imposing a ban on advertising, Sarkozy’s radical reform threatens to endanger its very existence, by depriving it of vital revenue and seeking to consolidate political control.

The reform therefore aims to introduce two tax measures designed to finance the EUR450m shortfall resulting from the loss in advertising revenue. These include levying a higher tax of between 1.5% and 3% on advertisements shown on private channels, and imposing a new 0.9% tax on turnover from telecom operators.

Centrists led by Senator Hervé Maurey are, however, opposing the reform, vehemently rejecting the suggested taxes, and preferring instead to combine a minimum EUR2 increase in the broadcasting tax, which is currently EUR116 per year, with a new tax on secondary residences.

Government spokesman Luc Chatel, however, firmly ruled out a rise in the broadcasting tax, announcing government's intention to index the tax to inflation instead.

Although the bill has not yet been fully ratified, for the first time in the history of the Fifth Republic, by virtue of a decree, the law has already entered into force: advertising on state television channels was banned as of January 5, 2009.

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