The French tax authorities began their assault against the online press on December 20th, sending inspectors to the premises of Mediapart and the Indigo group, publisher of newsletters of specialist information, to begin checking through accounts to establish a “readjustment of VAT”, an operation that is due to continue this Monday.
In France, the printed press is allowed a specially-reduced VAT rate of 2.1%, while the official VAT rate for the online press is 19.6%. This discrepancy is so blatantly unjustified that every government since 2009 has agreed it should be annulled so that both the printed press and the online press are subjected to the same rate.
While no corrective legislation has yet been introduced (this is expected to occur in next year’s public finance bill), political opposition to the discriminatory tax rate has been strong enough for the tax authorities to place a moratorium on the 19.6% rate while awaiting a reform of the law.
Within that context, and since 2011, several members of the French Association for the Independent Online Press (Spiil), of which Mediapart is a founding member, notified the tax authorities and political representatives that they had decided, in the name of equality of taxation and neutrality between media platforms, to apply to themselves the same VAT rate as for the printed press, at 2.1%.
Click on screen above to watch video of Mediapart editor-in-chief Edwy Plenel detailing, point by point, why the application of the 19.6% VAT rate is a gross injustice (in French only).
At 5p.m. on December 17th, a bailiff delivered notification to Mediapart that the tax authorities were to begin on Friday December 20th their audit of accounts, which is in order to recover the unpaid VAT. The highly unusual short period between the announcement of the inspectors’ visit and its starting date is quite clearly to be able to include the year 2010 in the tax calculations. If the audit began after December 31st, this would not have been possible because of a legally-imposed three-year limit to the length of the period that can be studied for backpayments.
Representatives of the Spiil, together with members of online publishers’ association Geste, met on Thursday December 19th with French budget minister Bernard Cazeneuve, culture and communication minister Aurélie Filippetti, and digital economy junior minister Fleur Pellerin to discuss the issue. It was made clear during the talks that what was called into question was not the raids by tax inspectors but the question of the application of the 19.6% VAT rate which creates an unacceptable situation of unfair competition between the printed and online press.
The Spiil underlined to the ministers that the inequality of the VAT rate went against European Union legislation, while also noting its frustration that there had been no reform of legislation despite the publicly-stated positions of successive governments in favour of a uniform VAT rate for both the printed and online press.
Finally, the Spiil called on the ministers to urgently make an announcement of their position on the issue.
On Friday morning, in an interview with radio news station France Info, digital economy junior minister Fleur Pellerin agreed that the “situation is a little absurd”, that it “creates a distortion of competition”. But she also argued that European law blocked the government from rectifying the situation, adding that Paris was requesting that the European Commission modify its VAT directive of 2006.
But in fact, as the Spiil made clear in a detailed report sent to government in February 2013, European law, on the contrary, requires the application of the same VAT rate to both the online and printed press, while also recognizing that EU member states are competent to independently fix low or super-low VAT rates (Article 98-2 of Directive 2006/112).
The argument that France is barred by European law from unifying VAT for the online and printed press is an incorrect interpretation of the Directive as has already been proven in a 2011 ruling by the European Court of Justice.
The financial interest to the state in applying the rate of 19.6% - due to be raised to 20% as of January – is almost non-existent compared to the more than 1 billion euros in state aid it provides every year, directly and indirectly, to the press. Management and strategy consultancy firm Kurt Salmon has estimated that the reduction of the 19.6% VAT rate would represent a shortfall of 5 million euros in tax revenue.
Future of independent online press at stake
Furthermore, the government has already announced its intention to unify the VAT rates applied to the press in the 2014 public finance bill, due before parliament next autumn for enforcement in 2015.
In a coincidence of dates, French justice minister Christiane Taubira took part on Wednesday in a debate (one of a regular series organised by this website) held at Mediapart's Paris offices and which was streamed live. The many issues that were discussed included the question of the VAT rates. “I will tell you very clearly what I think," said Taubira. "You should be given VAT at 2.1%. The Minister of the Budget agrees with that, and the Minister of Culture and Communication also. I have not heard anyone in government say that it shouldn’t be.”
While there is no justification for the discrimination under European law, nor any significant financial interest, why is it that the tax authorities have suddenly decided to do away with their moratorium on collecting the VAT at a rate of 19.6%? The answer may lie within a political context.
Firstly, a number of political parties and figures have shown unease at the emergence of independent online news publishers, some of who have refused to receive public subsidies, (as have Mediapart and Arrêt sur images since 2010), and who have created durable economic models by refusing advertising and basing revenue on subscriptions.
But there is also the decisive influence of the French finance ministry’s senior civil servants. A number of those appointed under former president Nicolas Sarkozy have been kept by the current administration. According to information gained by Mediapart, the decision was not taken at a ministerial level but was made by senior civil servants at the ministry and who wield pressure and power over the inspectors on the ground.
It is unclear whether this was an act of vengeance, coming one year after Mediapart forced the resignation of French budget minister Jérôme Cahuzac after it revealed the existence of his secret tax-dodging foreign bank account, and three years after this website’s revelations of the Bettencourt affair which led to the resignation of Nicolas Sarkozy’s former budget minister, later labour minister, Éric Woerth. But this cannot be ruled out as long as the cloud of smoke at the finance ministry continues to surround just how the decision was made, and while politicians appear incapable of applying their publicly-announced policy choices.
In the meantime, it is the future of an independent press that is at stake. A press that is not building itself up hand-in-hand with the authorities, but which is constructed with the solid support of its readers – and only its readers.
-------------------------
Below is Mediapart's petition calling for an end to the unequal and discriminating rate of VAT applied to the online press. You can lend your support by filling the form at the bottom of this page.
The text of Mediapart's petition (launched in French and English):
“The French tax authorities have decided to attack the online press by applying to it a Value Added Tax (VAT) rate of 19.6%, while the printed press benefits from a VAT rate of 2.1%. This measure violates the principle of equality and neutrality regarding media platforms, one which has been constantly championed by the public authorities in France since 2009 and which was also upheld by the European Court of Justice in a ruling in November 2011.
Since 2009, every successive French government has pledged to put this equality of taxation into place, making the simple observation that an online article cannot be taxed differently to one that is printed. In 2013, several official reports in France have underlined the urgency of the issue; that of Pierre Lescure on culture and the digital age; the Roch-Olivier Maistre report on subsidies for the press; the National Council for Digital Affairs’ recommendations regarding taxation, and the report by the national audit office - the Court of Accounts – on state aid for the printed press.
Last week, the Minister of Culture and Communication publicly pledged to adopt the measure. In a report to the Senate in November, Senator Pierre Laurent wrote that he was “astonished that the 2014 finance bill has not yet included the application of the super-reduced rate to all of the press”.
In an interview with Mediapart on Wednesday December 18th, French justice minister Christiane Taubira said: “I will tell you very clearly what I think. You should be given VAT at 2.1%. The Minister of the Budget agrees with that, and the Minister of Culture and Communication also. I have not heard anyone in government say that it shouldn’t be.”
Since 2009, the French tax authorities had put in place a moratorium on the issue while awaiting a promised modification of the law. We demand that this moratorium be extended and pronounced official, and we call for an urgent reform of legislation to establish, at last, the equality under law of the printed and online press.”
Lend your support for Mediapart's appeal by filling in the form below. Please place your last name in the top box, followed by your first name in the second box, and your place of residence (village/town/city) - but not your full address - in the final third box.