The decision by the French tax authorities, taken with ministerial approval after a procedure that has lasted almost two years, is illegitimate, unjust and incoherent. That is what we have argued, in vain, during the ultimate appeal we lodged with the senior hierarchy of the tax administration, as set out in a document prepared by Mediapart’s lawyers (and which can be downloaded here).
1. It is illegitimate because it is contrary to fundamental law, be that with regard to France’s constitutional laws or the laws of the European Union.
In line with the principle of equality contained in both the French constitution and the Charter of Fundamental Rights of the European Union, the principle of tax neutrality prohibits the application of different tax rates to activities of the same type. Whereas the written press, whether it be print-based or online, addresses the same readership, the French tax authorities have created a distortion to fair competition by applying to the online press a VAT rate that is ten times more than that applied to our print-based rivals. What’s more, this distortion penalizes the independent digital press which has chosen to depend financially only on revenue from subscriptions, while it favours the advert-carrying free websites which are operated by print-based news organizations which benefit from a reduced VAT rate of 2.1%
Otherwise put, the tax authorities stubbornly refuse to recognise Mediapart’s official status as a news journal, as officially recorded with the French press regulatory commission, the CPPAP, and which as such benefits its readers (a more attractive price) and democracy (news is not a merchandise like any other). By applying the same discriminatory tax adjustments to other online journals which also exist thanks only to their subscribers – notably Arrêt sur images and the Indigo group – the French tax authorities by definition simply deny the existence of an online press, one which has a specific status and rights.
By referring us to the texts of old tax legislation which dates to before the digital revolution, when our form of press did not exist, the tax administration adds ridicule to illegitimacy. While the State has, since 2008-2009, recognised the digital press as being on a par with the printed press, the behaviour of the tax authorities is as if they are a state within a state, with their own rules, however archaic.
2. The decision is unjust because, on top of the retrospective tax adjustment, Mediapart additionally faces a fine of 40% of the amount due, described as a penalty for “deliberate default”, as if we had committed some sort of secret fraud.
Mediapart’s decision to apply the same VAT rate as that from which the printed press benefits dates back to the public conclusions of the 2008 States General of the Written Press (a three-month government-sponsored convention on the future of the press), held the same year that Mediapart was created. During the closing speech of the States General, pronounced at the Elysée Palace in January 2009 by then –president Nicolas Sarkozy (hardly one inclined to show us favouritism), he made the principle of equality quite clear: “The status for the online press publisher will open the right to the same tax regime as [print] press organizations,” Sarkozy announced. “[…] France cannot accept remaining in this doubly stupid situation where the digital press is disfavoured with regard to the printed press, and the paywall digital press disfavoured with regard to the free-access digital press. There is no sense to it.”
From 2008 to 2013, all the official interlocutors informed by Mediapart of the VAT rate that we applied lent us support for our defence of equality between the online and printed press. These officials include members of the French president and prime minister’s office, of the culture ministry, and the finance and budget ministries. Within the ministerial cabinets and the administrations concerned, they supported our position which was, in parallel, also supported by all the professional associations and notably the the French Association for the Independent Online Press (Spiil), of which Mediapart is a founding member.
All those concerned were clearly informed both of the immediate legitimacy of applying a reduced VAT rate to the online press, and also of French government moves to have this definitively included in the new European union directive on VAT. The former directive, under renegotiation, dated from 1991, when the online press did not exist. Far from carrying out fraud, Mediapart was acting within the framework of what was a moratorium, with the tacit agreement of the public authorities, while waiting for the end of the European negotiations for which Paris had mandated Jacques Toubon as its representative. Toubon met with us and gave us his support.
3. The decision is incoherent because it goes against the recognition by the public authorities, both at a French and European level, of the archaic nature of discrimination against the online press ever since its creation.
In face of the unanimous protest by the journalistic profession (from press organisations to journalists’ unions) from the very start of the tax authorities’ sudden review of Mediapart’s accounts at the end of 2013 (see more here and here), the French parliament voted through a law dated February 27th 2014 which solemnly declared that the online and printed press had equal status. This law was passed in advance of the conclusions of the European Union negotiations on VAT reform, and while France today is urging this equal status to be adopted by Brussels at a continent-wide level, that position can only be weakened by the tax administration’s offensive against Mediapart.
The tax administration’s attitude is all the more incoherent because the European Commission, whose president Jean-Claude Juncker clearly supports our position, is moving towards adoption of the equal tax status. “The Commission will propose this reduced VAT rate to all member states in 2016,” said Juncker at a meeting with the Federation of German Newspaper Publishers (BDVZ) in Brussels on May 6th. “The press is about contents. Whether these contents are proposed to readers on paper or online, the VAT system should be technology-neutral.” Juncker also underlined that the current European directive on VAT, behind which the tax authorities shield themselves for the tax adjustment applied to Mediapart (for the period up until the new French law was passed in February 2014), was adopted in 1991 when “the online press did not yet exist”. He said the previous European Commission “did not realize that a little revolution has happened since”, adding that “it’s something we’re going to change”.
“We need technology neutral VAT systems,” Juncker insisted.
In other words, Juncker believes the online press had a right to the reduced VAT rate as soon as it began publishing on the internet, and that the 1991 directive was overtaken by the current technological and industrial revolution. That is precisely what Mediapart demonstrated with its pioneering economic model which was, at the moment of its creation, unique. As long as the digital press was free to readers (i.e. no subscription was required), the question never arose. Mediapart is therefore the subject of an absurd penalty, handed down in the name of legislation that did not take the digital press into account and by tax authorities who have turned their backs on all the reports, commissions, expert advice and more which has urged the government to bring itself up to date on the issue.
Mediapart, which has never avoided paying taxes, is paying the price of audacity, of having been a pioneer.
Lend your support to Mediapart, to an independent press
Mediapart has in effect been struck down for having been right. Firstly, for having led the government to official recognition of the online press by being the first online journal to press for this with the French press regulatory commission, the CPPAP. That was at the moment of our creation in 2008, at a time when the public administration recognised the press only in its print-based form. Secondly, for having led the government to recognize the principles of equality and neutrality – equality between press publications whatever the platform they use, and technological neutrality, which implies tax neutrality. Finally, these battles were led in public and in all transparency, with no recourse to backroom manoeuvring or secret lobbying.
It is a long-proven truth that pioneers cause upset, notably among all the spheres of conservatism and immobility that they disturb, and now has come the chance for the latter to seek vengeance, one which comes with a hard price. After their extensive study of our accounts, the tax authorities have of course no reproach to make to Mediapart over its tax returns other than the issue of the reduced rate of VAT which we applied, on an equal footing with the printed press. The adjustment that has been applied amounts to 4.1 million euros, including the penalty fines.
The capital savings put aside by Mediapart since the first year it began making a profit, in 2011, amount today to 4.7 million euros. Aside of the tax administration’s demands, Mediapart expects to record an operating loss in 2015, after four years of progression during which we have demonstrated the viability of an independent press which lives only from the support of its readership.
The blow that we have now received will empty Mediapart’s savings, draining funds that we had put aside for the building of our independence and the development of our activity. For, despite our legal appeal against the decision by the tax authorities, we are required to immediately pay most of the sums demanded of us. Only the payment of the sum of the penalty fines is suspended while the appeal takes its course.
It is as if we were suddenly thrown back to the moment of our launch, and that the gradual progression of SAS Mediapart has been erased in one go. This young company is special, it is a symbol of the success of the online press, the evidence that it is possible to mount a viable online journal through nothing other than the quality of its editorial team and the support of its readers. With no dependency on others, no conflicts of interest, our company, which has no debts, has always ensured it lives up to the values that we champion on our pages. Unlike our competitors, and notably those that benefit the most from funding by private industrialists, we refuse to accept any of the public subsidies the press are granted in France, nor any financing from the Google fund. Neither public money, nor private sponsors; our readers are the only people who can buy us!
Our ambition is to establish an enduring, new, totally independent, totally digital and totally participative press at the centre of public life. The funds that the tax authorities will now drain from us were destined to build and consolidate this project. This was intended above all to develop Mediapart’s contents, but also, potentially, to create other complimentary websites that would surround it. Along with this, our plan is to strengthen the independence of our structure by organizing the transition of Mediapart’s capital from what today is a structure controlled by its four founding members and small stakeholders, (the Société des amis de Mediapart), to an entity that includes all of Mediapart’s staff. This second phase of our adventure was due to be made effective between now and our tenth anniversary, in 2018.
These projects are now variously blocked, slowed down or postponed. Mediapart must firstly rebuild its finances, which are the principal guaranty of its independence. In financial terms, we have been sent four years behind. Weakening Mediapart was the aim of those who initiated the tax adjustment, the chronology of which is politically revealing. It began precisely one year after Mediapart’s revelations in December 2012 that French budget minister Jérôme Cahuzac held secret bank accounts abroad, which Cahuzac at first strenuously denied before being forced to admit the truth in April 2013. The tax offensive against Mediapart was given the green light by the hierarchy of the finance ministry administration, the very same which held block with the former minister during his months of lies, including before parliament, in face of our investigations.
Which is what prompted the then-culture minister Aurélie Filippetti to write to President François Hollande criticizing the “unwelcome” tax inspection targeting Mediapart. In her letter dated January 21st 2014 (it can be downloaded, in French, here), Filippetti underlined that the move by the tax administration would not have taken place if her demand for a rapid and clear recognition of “the principle of technological neutrality in the press” had been taken into account earlier. “What is more, we would have gained true political benefit from an alignment of the [VAT] rates, by showing a government that was proactive on the digital issue,” she wrote.
Today, it is exactly the opposite that has been demonstrated. While all the French press is mired in an economic and moral crisis, issues of financial viability and independence, the government is severely punishing one of the rare tangible examples of success in the sector, one that is a profitable press organisation which has constantly created jobs and which refuses to make use of subsidies.
At our beginnings, to convince our readers to become subscribers, we stressed that independence has a price. The truth of this is bitterly evident to us all today. From the outset, we led our fight against the tax authorities on the basis of principles and without, of course, seeking any special favours. Our fight was for all of the press, online or not. Certain of the rightfulness of our cause, we never negotiated or compromised during all the many meetings with the tax administration whose representatives appeared to have no margin for manoeuvre. It was as if these ill-intentioned tax inspections were beyond them. We will now obviously continue our battle through legal means, firstly before the administrative tribunal and, if this is not successful, before the Council of State.
But this procedure will be a long one, just as was the control carried out by the tax authorities which, over a period of two years, has hampered our development. Most importantly, our appeal procedure does not suspend the deadline for the payment of the tax adjustment, which must be made now. We have no choice, and fortunately the funds put aside thanks to our healthy accounts allow us to meet this. But it remains that this leaves us with a difficult path ahead, a more uncertain future and a more fragile independence. Which is why we turn to you, our loyal readers, and our occasional readers. You are our only support.
You can support us by becoming a subscriber to Mediapart (see how to do so here). If you are already a subscriber, you can offer a subscription to others around you (see how to do so here). Finally, and above all, you can help us by making a donation to Mediapart (a participative donation which in France is tax deductible at a rate of 66%) via the dedicated platform (which can be accessed here, in French only).
We thank you for your loyalty and your solidarity.
-------------------------
- The French version of this appeal can be read here.