France’s Canal+ Threatens to Pull $1.1 Billion Cinema Deal Over French Tax Hike

Canal+ Group chairman Maxime Saada has warned that the pay TV banner could pull out of its €1 billion ($1.1 billion) investment deal with the French film industry if the government goes ahead with plans to double VAT on pay-TV subscriptions.

The measure, included in the government’s proposed finance bill, would scrap the reduced 10% VAT rate currently applied to subscription-based services and bring it in line with France’s standard 20% rate. Canal+, by far the country’s biggest pay-TV operator and one of the main pillars of French film financing, would be hit hardest, representing a cost of approximately €200 million a year.

The suggested reform come as the French government is under pressure to bring down the country’s growing debt, and is looking for €43 billion in savings and additional revenue in 2027.

Saada said during an interview with French radio RTL that the change would effectively void Canal+’s existing agreement with French film organizations, under which the group has committed to invest roughly €1 billion in in French and European films between 2028 and 2032.

“We invest more in cinema than any other player. Our commitment to film organizations is a contract, and the first clause – the quid pro quo for Canal+’s funding of cinema — is the reduced VAT rate,” Saada said. “We don’t even need to renegotiate it. The contract is void if the standard VAT rate is applied.”

If Canal+ were to fall back on its strict regulatory obligations rather than maintain its current commitments, its annual contribution to cinema could drop to around €50 million, according to Saada.

“We cannot find ourselves in a situation where we’ll lose €200 million in France. My concern is the group’s long-term viability,” said the Paris-based executive.

The pay TV group was behind six movies that played at Cannes this year, notably Quentin Dupieux’s “Full Phil” starring Kristen Stewart and Woody Harrelson, and Jeanne Herry’s “Garance” starring Adèle Exarchopoulos.

Canal+ has long argued that its heavy investment in French cinema goes hand in hand with the regulatory and tax advantages afforded to the group. Saada has threatened before to reduce the group’s investment during tense negotiations over windowing rules and Canal+ was granted an earlier access to movies after their theatrical run in exchange for its substantial investment obligations.

The proposed finance bill also contains a raft of measures affecting public broadcasting. Under the current draft, funding for France’s public broadcasters, mainly France Télévisions, would be cut by €47 million to €3.82 billion. France Televisions’ president Delphine Ernotte Cunci recently said in an interview wiith Le Monde that the pubcaster was also facing €47 million cut in subsidies, along with a 20% decline in advertising revenues, and warned that these cuts represented a “threat to the funding of French cultural production” and exposed the sector’s dependency on U.S. streaming services.

The bill also proposes reducing by half the tax rebate applied to platforms such as YouTube and TikTok which have benefited from a 66% allowance on advertising revenues since 2016. French film and TV executives have been lobbying hard for YouTube to invest in local content. In the meantime, the change in the levy applied to these services would effectively broaden the tax base and increase hugely the amount flowing into the CNC, the National Film Board which subsidies the cinema and audiovisual industry.

The finance bill still has to make its way through the parliament. While the industry braces for budget cuts, it’s also facing threats from Marine Le Pen’s far right party Rassemblement National which is leading polls in the upcoming presidential elections and has been highly critical of French cultural eco-system.