France will raise the rate of tax telcos pay on bundled services despite a raft of objections from carriers who say the move will lead to higher consumer prices.
Budget minister Francois Baroin confirmed it would raise VAT levels on triple-play services yesterday, after coming under pressure to bring its taxation system in-line with European Union rules, Automated Trader reported.
Finance ministry sources said the government could change the percentage of triple play subscription fees that are subject to the country’s full 19.6% VAT, replacing the current set-up where the first half of subscriptions are taxed at 5.5% with the remaining 50% subject to the full figure, Reuters reports.
Telcos reportedly save around €200 million per year under the current approach.
The government has been forced to act after European Union officials said the current triple-play taxation system breaches its rules relating to competition and state aid, Reuters said.
Any change would likely hit Iliad hardest, as the firm benefits the most from the current rates, French brokers Oddo said.
The firm predicts the change would cut Iliad’s EBITDA by 2.5% to 5%, compared to the 1% decline rivals France Telecom, Vivendi and Bouygues would experience.
Triple-play services have helped drive down the cost of fixed-line broadband connections in Europe from €7.50 per month in 4Q09 to €5.80 in 2Q10, according to a recent Analysys Mason report.