Canal+ warns French VAT hike could cost €200m annually and hit film investment

Canal+ has warned the French government’s proposed doubling of VAT on television subscriptions could cost the group up to €200m annually and force it to raise subscription prices, cut jobs and reduce its investment in film and television production.

In a strongly worded statement, the French pay-TV giant described the proposal to increase VAT on TV subscriptions from 10% to 20% in mainland France as a “direct attack” on its activities in its home market.

The measure is included in France’s proposed 2027 budget, unveiled on October 1 as the government seeks €54bn in savings and additional revenues to rein in the country’s deficit. The budget still needs to make its way through parliament and could be amended.

The proposed change is aimed at simplifying the VAT regime for so-called composite television offers, which combine traditional linear channels with on-demand content. Conventional pay-TV services currently benefit from a reduced 10% VAT rate, while on-demand platforms such as Netflix and Prime Video are subject to the standard 20% rate.

Canal+, whose packages increasingly combine both types of services, would be particularly exposed. The government argues in its draft legislation that the existing system has become overly complex and a single VAT rate should apply.

“If this measure were adopted, its negative impact on the group’s revenue and operating margin would be massive and could reach €200m per year,” Canal+ said in a statement.

The group added that it would be forced to adapt its French operations, with “a definite impact” on subscription prices, staff levels and investment in film, sport and the wider creative industries.

Canal+ is France’s leading private financier of cinema and in July signed a new five-year agreement with local cinema guilds committing €980m ($1.1bn) to French and European films between 2028 and 2032. The agreement contains a clause allowing those commitments to be suspended in the event of a VAT increase, according to recent French media reports, fuelling widespread concern across the local industry.

Canal+ said it intends to lobby the French government against the proposal before it becomes law. The group, which now operates in nearly 70 countries, also warned the measure could accelerate its strategic expansion outside of France.

Industry sounds alarm

There is mounting industry concern across France’s film and television sectors about government budget measures affecting the country’s traditional content financing system.

A group of film organisations including filmmaker body ARP and producers union USPA issued a joint statement earlier this week calling on the government to withdraw measures affecting Canal+ and France Télévisions, the public broadcaster that is being subjected to budget cuts.

“France Télévisions and Canal+ are two pillars of the financing of French cinema and audiovisual production,” the organisations said, arguing that the measures will reduce investment and jobs.

They also opposed plans to cap taxes allocated to the CNC and called for an end to preferential tax treatment for YouTube and other free video-sharing platforms on levies paid to the CNC.

Since 2016, free platforms such as YouTube and subscription services including Netflix have been subject to France’s tax on physical and online video distribution, but for free video-sharing platforms the levy is calculated on only 34% of revenues.

The 2027 budget partly addresses those concerns, proposing to raise the share of revenues subject to the levy from 34% to 67% for platforms including YouTube, TikTok, Facebook and Instagram. The industry groups, however, are calling for the levy to apply to 100% of revenues.