French government pulls back from pay-TV VAT increase

The French government has pulled back from its plan to raise the rate of VAT levied on pay-TV operator Canal Plus from 5.5% to 19.6%.

Following discussions with French cinema organisation on Monday, President Nicolas Sarkozy decided to pull back from the plan, which could have forced Canal Plus to raise its subscription charges significantly, with the risk of losing a substantial proportion of its subscribers. The move had also raised the threat of the pay-TV operator scaling down its support for the French cinema industry, leading organisations including authors society SACD, cinema distributors and producers’ groups to lobby for a reprieve.

According to a report in financial daily Les Echos, the government could still look for other concessions, such as an increase in the amount Canal Plus contributes to French cinema, or another form of financial contribution from parent group Vivendi.