French government considers raising "triple play" service tax

French consumers may have to pay a higher value-added tax (VAT) on what they pay for their "triple play" voice, video and broadband service bundles.

Facing pressure from the European Commission (EC), who believe France's current rate violates competition rules, if the tax were to be reformed the VAT rate on triple play services could increase by 19.6 percent. Right now, the French VAT places a 5.5 percent tax on the TV piece of the bundle.

Given the healthy competitive broadband market, the country's dominant broadband operators--France Telecom (NYSE: FTE), Iliad (Paris: ILD.PA), Bouygues Telecom (NYSE: EN), and Vivendi's SFR (Paris: VIV.PA) oppose the proposed VAT increase. While none of these service providers would comment on the issue, their fear is that they'll have to raise their prices-not exactly a popular measure for any service provider.

According to a source close to the Finance Minister Christine Lagarde cited in a Reuters article, 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 on March 18." While it's possible the finance ministry could act on the EC's complaint in the 2011 budget, it has yet to make a decision on how to reform the tax.

For more:
- Reuters has this article

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