Broadcasters fuming over VAT proposal

TV broadcasters and pay channels were up in arms last week over a government proposal to levy a 22% value-added tax (VAT) on their programming sales. The amendment, designed by the Democratic Left Alliance (SLD)-led government to ramp up budget revenue, passed last week in Parliament and now moves to the Senate. Under the terms of the bill broadcasters would have to pay 22% VAT when selling licenses to their programs, significantly increasing their costs. The amendment would hit pay-TV channels especially hard because they depend on subscriber fees, rather than advertising, for revenue. TV broadcasters, which already pay VAT on ad revenue, would be able to deduct those tax costs when selling programming. Pay-TV Canal+ Polska, whose revenue mainly comes from VAT-free payments collected from subscribers, is concerned that the government's proposal will force them to reconsider their cost base. "It's a fact that if the amendment to the VAT law goes (into effect) it will mean an increase of costs to us," said Małgorzata Babik, public relations director of Canal+ Polska. "We are concerned, but I hope that the Sejm will eventually find a rational solution." But regardless of whether the amendment becomes law, Canal+ Polska has a plan up its sleeve to generate fresh revenue. For the past two months, the company has been lobbying the National Television and Radio Council (KRRiTV) to make changes to its broadcasting license and give it the right to run more ads on its pay channels. Until now, Canal+ has only been able to place ads amounting to 3% of its total broadcasting time. Babik wouldn't comment on her company's application for a 15% ad limit - the maximum allowable in Poland - but the change would enable the company to offset a potential cost increase from the new VAT law. If the KRRiTV approves the change and Canal+ starts paying VAT on ads, the channel will be able to make deductions like other commercial TV stations whose revenue is based on advertising. "I don't want to speak about our strategy now when we still don't know what the final version of the amendment will be but if the worst happens we'll think about what to do," Babik said. Joanna Stempień, spokeswoman for Juliusz Braun, chairman of the KRRiTV, confirmed the council had received Canal+'s applications. "But it wasn't even considered by either of our departments so I really cannot comment," she said. "Our legal department will decide whether this application is in line with current law, but they wouldn't have submitted it if they weren't sure it was legal."