Canal+ hit by doubling of VAT on premium channel

French pay TV leader Canal+ has been hit by a VAT hike on some of its offerings that is likely to be passed onto consumers in a price rise.

According to financial daily Les Echos, which reported the news, the French authorities are to double the tax levied on some offers from 10% to 20%, most likely leading to an upping in its subscription prices.

According to the paper, subscribers were informed of the change by email last Friday.

Canal+ said that the precise impact on its prices would be communicated to subscribers in the timeframe set out under the general terms and conditions of subscription.

Canal+ had for a long time lobbied for a cut in VAT from the 10% rate imposed in 2011 to 5.5% to enable it to compete more effectively with international rivals.

According to the paper, the doubling in tax will impact the premium encrypted Canal+ channel, which also serves as the home of its sports, movies and series offerings.

Streaming services Netflix and Disney+, which Canal+ carries on its boxes, already pay 20% VAT on their offerings. The higher rate is also levied on Canal+ Séries, the pay TV operator’s offering of drama series. The premium channel will henceforth be treated in the same way as these SVOD offerings.

The likely price hike of €2 on average, bringing the price of the offering from €20 to €22 will, says Les Echos, only apply to out-of-contract and new customers who will see prices rise in a few months.

Customers in long-term contracts will see no change, with the pay TV operator absorbing the impact of the hike, said the paper.

According to Les Echos, the change could have unintended consequences for Canal+’s recent agreement with French cinema organisations, committing it to finance film production to the tune of €200 million a year, which was based on the assumption that the tax rate would remain at 10%. The paper speculates that the change could provoke Canal+ to revive a threat to focus more on series rather than cinema production.