Spanish telcos lose EC tax battle

Spanish telcos have lost their fight against the government-imposed 0.9 per cent annual tax on their revenues to finance public broadcaster RTVE following the EC’s decision to withdraw its appeal before the Luxembourg Court, shortly after the latter ruled that the similar tax legislation in France is compatible with European regulations. The European Court is now likely to shelve the case authorising the telco tax in Spain and also Hungary – the other affected country that was also taken to the EC justice.

Last June, the Luxembourg Court ruled that the tax imposed by France on telco companies “does not break the telecommunications rules in the EU”. In the light of this ruling, the Court has now taken the decision to withdraw its legal action against Spain and Portugal.

With the decision, the government-imposed RTVE’s tax financial model will remain unchanged unless the Spanish Supreme Court finds to the contrary. but this move now seems to be very unlikely. For the telco companies -Telefonica, Vodafone, Orange and ONO, the Supreme Court is their last chance to reverse the situation and eliminate a tax regarded by them as “disproportionate, harmful and illegal”.

Telcos and commercial and pay-TV channels are obliged by law to dedicate 0.9 per cent, 3 per cent and 1.5 per cent, respectively, of their revenues to finance RTVE, with a budget of around €900 million including the taxes and the state subsidies. In 2012, telcos and TV channels paid €217,356,305 to RTVE, according to the CMT (Telecommunications Market Commission), with the former paying €155.83 million, around 72 per cent of the total, commercial TV channels €44.71 million representing 20.57 per cent and pay TV channels €16.8 million, 7.73 per cent. As a result of the tax, Vodafone pulled out of the mobile TV business in order to avoid paying around €30 million a year.

For the Spanish government, the EC’s decision is a real boost as it had reconsidered allowing RTVE once again to be financed by a mix of advertising revenues and state subsidies failing to meet the demands from the private broadcasters who objected on the grounds that the TV ad pie would be reduced by around €300 million from the total estimated for this year at €1.8 billion.

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