The French tax on broadcast/selling of audio-visual contents officially becaming “tax on physical and online broadcasting of audio-visual contents, and generally called “Youtube/Netflix tax” is mandatory since the beginning of the year 2018. It is necessary to understand its mechanism but also its legislative history.
In December 2016, French National Assembly voted the budget (“loi de finance rectificative pour 2016”) that notably implement a new tax on the advertising revenues of websites broadcasting free or paid videos online. This tax completes the existing tax mechanism for online TV platforms or video-on-demand online services and must be paid to the French center for cinematography (CNC). Since then, this tax awaited the approval of the European Union regarding its conformity with EU laws and an implementation decree. Such decree was taken on September 20th 2017 (Décret n° 2017-1364) for an entry into force on January 1st 2018.
If the purpose of this new tax mechanism is rather obvious: (online broadcasting shall support the audio-visual and cinematographic production), its mechanism is more complex.
The scope of the tax is wider than the scope of the previous tax, which was due only by French broadcasters and applied for broadcasting to French consumers. From now on, persons established abroad carrying out broadcasting for French consumers are subjected to the tax in the same way as operators established in France.
This new tax is based on the eventual price paid by French consumers to access the audiovisual contents but also and in particular on broadcasters’ revenues to come from the broadcasting of advertising and sponsorship contents. It is unfortunate for the film production sector that the tax only applies for French advertising revenues, but it could not be otherwise because of the principle of fiscal territoriality. It should also be noted that only advertisements on video pages or in the videos are taken into account, excluding catch-up television that is subject to a different tax mechanism, or home pages not dedicated to a specific video.
The rate is set at 2% and increased to 10% for websites that broadcast pornographic or violent content. However, it is to be noted that tax reductions are provided as follow: a 4% standard allowance, increased to 66% for services broadcasting private users contents (i.e. non professional contents). Furthermore, broadcasters that make contents available free of charge for the consumers, shall deduct a lump-sump allowance of € 100 000 before calculating their tax.
It is also provided that the following services are not subject to the tax: services in whose audiovisual content is secondary, information services, as well as services which main purpose is to provide information relating to cinematographic and audiovisual works and to promote them notably thanks to extracts or trailers.
Thus, it seems that the scope of this new tax is rather narrow, which has been a focus of criticism. Concerns also arise regarding the recovery of this tax from non-French platforms.
The French secretary of State for budget notably evoked this difficulty during parliamentary debates, stating that it will be much more difficult to collect the tax abroad. He also estimated that this new tax would only return one million euros. Thus, the effects of this new tax mechanism remain to be established. The recent implementation of the tax does not allow determining its effective impact but testifies of the willingness of the French state to catch up with the new methods of broadcasting in the audiovisual field. In conclusion, if the new law is allowing a contribution of the Internet plattforms in the financing of audio-visual works, the mechanism seems already inadequate to provide a real difference for the film industry.