Canal+ Tax Fight Puts French Cinema Financing At Risk

CHINA – 2021/12/09: In this photo illustration the French premium television channel, studio and distributor, Canal+ logo seen displayed on a smartphone with an economic stock exchange index graph in the background. (Photo Illustration by Budrul Chukrut/SOPA Images/LightRocket via Getty Images)

SOPA Images/LightRocket via Getty Images

Canal+ is mounting an aggressive challenge to the French government’s plan to double the value-added tax on television subscriptions, warning that the proposed measure could cost the company as much as €200 million ($225 million) a year and force changes to its pricing, workforce and investment in French content.

The proposal, included in France’s draft 2027 budget unveiled Oct. 1, would raise VAT on television subscriptions from 10% to 20% in mainland France, while increasing the rate fourfold in the overseas territories. The government is pursuing the measure as part of a broader effort to shore up the country’s public finances. The budget must still pass through France’s parliamentary process and could be amended before becoming law.

For Canal+, however, the proposal represents more than a tax dispute. The company argues that the additional burden would directly threaten the economics of its French operation and, by extension, the unusually interconnected system through which French broadcasters help finance domestic cinema and television production.

In a sharply worded statement, Canal+ described the proposed change as an “attack” on its French business. The company said the resulting impact on revenue and operating margin could reach €200 million annually, while arguing that the state’s additional revenue would amount to less than a quarter of that figure. It said it would not be able to absorb the loss and would consequently have to reconsider its French operations, with potential consequences for subscriber pricing, employment and its financial contributions to film, sport and the wider creative economy.

The timing is particularly sensitive for the French film business. In July, Canal+ signed a new five-year agreement with major French film organizations committing €980 million to French and European cinema between 2028 and 2032 — an average of €196 million per year. Canal+ called the agreement unprecedented in its scale and duration.

That commitment is now at the center of industry concerns over the tax proposal. French film organizations had already warned the government that a VAT increase could destabilize the financing model underpinning domestic production. Le Monde reported that the new agreement contains significant investment commitments and that industry representatives fear Canal+ could seek to renegotiate them if the tax increase becomes law.

The stakes extend beyond Canal+ itself. French broadcasters and platforms operate within a regulatory system that links distribution revenues to investment in local production. Canal+ has long been one of the most important private financiers of French cinema, making its financial health a matter of concern for producers, distributors and filmmakers as well as its subscribers.

Industry groups have therefore pushed back against the government’s wider package. Ahead of the budget’s publication, French film and television organizations issued a joint warning that the proposed Canal+ VAT increase, alongside planned reductions in funding for public broadcaster France Télévisions, could undermine the country’s creative ecosystem. They argued that Canal+ and France Télévisions are two of the central pillars of French film and audiovisual financing, supporting projects through investment obligations, pre-buys and other commitments.

The dispute also comes at an awkward moment for Canal+ on the regulatory front. On Sept. 29, France’s Autorité de la concurrence formally notified objections concerning potential abuse of a dominant position in the pay-TV and film acquisition and distribution markets. The investigation dates back to 2024 and concerns alleged unfair trading conditions. The authority stressed that the notification of objections is part of an ongoing procedure and does not prejudge the final outcome or establish wrongdoing.

Meanwhile, Canal+ is becoming an increasingly international business. The company, which separated from Vivendi and listed on the London Stock Exchange in 2024, has expanded aggressively outside France, including through its acquisition of African media group MultiChoice. Canal+ says it now operates in nearly 70 countries. Against that backdrop, the French tax proposal could strengthen the economic case for putting further capital and strategic attention into its international operations.

There is also a broader competitive question behind the proposed VAT change. Traditional pay-TV subscriptions have benefited from a reduced 10% rate, while streaming services such as Netflix have generally been subject to the standard 20% VAT rate. Canal+ increasingly operates as an aggregation platform, combining traditional television channels with on-demand services and access to third-party streamers. The government’s proposal would effectively eliminate the preferential treatment for television subscriptions and create a more uniform VAT regime.

For Canal+, that distinction has become increasingly difficult to defend as its business model evolves toward a broader entertainment platform. For the French film industry, however, the question is less about the technicalities of VAT than about what happens to the money flowing back into production if Canal+’s economics deteriorate.

The company has already signaled what it regards as the likely consequences: higher subscription prices, fewer jobs and lower contributions to film, sport and other creative sectors. It has also said it will intensify its international expansion if the measure is adopted.

The proposed tax change therefore sets up an unusually consequential confrontation between France’s fiscal priorities and its cultural-policy model. The government is seeking additional revenue and a simpler VAT structure at a time of significant pressure on the national budget. Canal+ and the production sector are warning that extracting more from one of the country’s principal content financiers could ultimately reduce the amount available for French-made programming.

For now, the measure remains a proposal rather than settled law. But with Canal+ preparing to lobby the government, film organizations already mobilized and the company’s latest cinema investment agreement still fresh, the fight over the 2027 budget is shaping up as a much larger debate over the future economics of French audiovisual production.