UPDATE: EU Steps Up Telecom Tax Action On France, Others
March 14 2011 - 10:34AM
Dow Jones News
The European Commission Monday referred France and Spain to
Europe's highest court and instigated the first step in legal
proceedings against Hungary, because the countries' taxes on the
turnover of telecoms operators may not be compatible with European
Union law.
The commission referred France and Spain to the European Court
of Justice after they failed to comply with its request in October
last year to end charges that were introduced partly to offset the
end of paid advertising on public television.
"The commission considers the 'telecoms taxes' in France and
Spain to be incompatible with EU telecoms rules, which require
specific charges on telecoms operators to be directly related to
covering the costs of regulating the telecoms sector," European
Commissioner for the digital agenda Neelie Kroes' department said
in a statement.
In France, telecoms operators have to pay 0.9% of their total
revenue from subscribers, which is then used to fund French public
TV. The annual income from the new charge, which is paid to the
French Treasury by operators including France Telecom SA (FTE),
Vivendi SA's (VIV.FR) SFR and Bouygues SA's (EN.FR) telecom unit,
is estimated at around EUR400 million.
France maintains that a tax on local telecoms operators is
compliant with European Union rules, a person close to the French
Finance Ministry told Dow Jones Newswires.
"We don't agree with the Commission's analysis...We don't
believe this tax is contrary to EU rules," the person said. "We
will make clear our arguments before the court."
In neighbouring Spain, the government introduced a similar law
in September 2009 to help fund state-owned broadcaster RTVE, which
controls the country's top channel by audience, TVE1. The
operators, including market leader Telefonica SA (TEF), made the
first payment in Oct 2010. Overall, the charge was expected to
generate revenue of around EUR230 million in 2010.
The Spanish government didn't immediately respond to a request
for comment.
If such taxes are found to be incompatible with EU law,
companies who paid the levies could theoretically take out
injunctions against governments to get the money back.
In Hungary, the commission opened infringement proceedings
against the government's telecoms tax, saying it was "similar" to
the French and Spanish cases. It has sent a "letter of formal
notice," the first stage of EU infringement procedures, to which
Hungary has two months to reply.
Hungary collects HUF61 billion ($309 million) a year from the
extra tax levied on the telecom sector. The tax was set to be in
place for three years starting in 2010.
The letter comes against a backdrop of other disputes between
Hungary and the EU. Earlier this month, the Hungarian parliament
passed amendments to a much-debated media law introduced Jan. 1.
Kroes, present in parliament at the time of the voting, welcomed
the amendments.
There are also further potential cases in the pipeline. The
application of the "special tax" to retail commerce and to energy
companies is still being analyzed by the commission.
"We're in contact with the Hungarian authorities," an EU
spokeswoman told reporters at a press briefing, adding a response
was expected on the levies in other sectors "very soon."
The Hungarian Government didn't immediately respond to requests
seeking comment.
-By Frances Robinson, Dow Jones Newswires; +32 2 741 1486;
frances.robinson@dowjones.com
(Margit Feher in Budapest and David Roman in Madrid contributed
to this article.)