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France Mulls VAT Hike On Pay TV

by Ulrika Lomas,, Brussels

07 September 2010

Marking a further assault on existing tax breaks in France, the French budget ministry is reportedly considering the idea of increasing the rate of value-added tax (VAT) currently levied on pay television from 5.5% to 19.6%.

Such a decision to abolish the reduced rate, which has benefited pay television services since 1986, would serve to generate more than EUR1bn for the government, and would affect Canal Plus, CanalSat, and Numericable.

Following an instruction issued by the European Commission back in March, the French government is also now considering the idea of revising the taxation of “triple play” offers within its telecommunications sector. The government is contemplating plans to tax triple play services – television, telephone, and broadband internet – all at the standard VAT rate of 19.6%. Currently, 50% of the bill for “triple play” subscribers is taxed at the reduced rate of 5.5%, while the remaining 50% is subject to the standard rate of 19.6%.

Quick to respond to news of the proposals, the regions in France have already emphasized the need for the product of this VAT increase on triple play offers to be transferred directly to local authorities, to support them in the development of digital networks. In terms of their fiscal autonomy, local authorities in France have been most affected by the reform of local business tax (la taxe professionnelle) and are therefore eager to find new sources of revenues.

TAGS: tax | business | European Commission | commerce | budget | internet | e-commerce | France | tax breaks | telecoms | Europe

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