Hike on triple-play VAT to appease EC?

26 Aug 2010

The French government is said to be considering increasing the rate of value-added tax (VAT) charged on ‘triple-play’ packages of phone, TV and broadband, reports Reuters quoting a source close to Finance Minister Christine Lagarde. ‘The finance ministry is considering adapting the system to respond to the requests of the European regulators, as they relate to the complaint filed by the European Commission (EC) on 18 March,’ the source commented.

The EC has claimed the current VAT rate breaks competition rules; at the moment half the bundle, considered the TV portion, is taxed at a lower 5.5% rate. It is possible the VAT rate on triple-play services could now increase to as much as 19.6%. Although none have commented on record, unsurprisingly the telecom operators are believed to oppose the change, and have suggested if it goes ahead they may have no choice but to raise their prices as a result.

The unidentified source said a decision could be made in the 2011 budget [due in late September], but no judgement has been made yet on how the tax would be reformed.