French Will Tax Tv Ad 'surplus'

French Culture Minister Catherine Trautmann confirmed Tuesday that the country's socialist government plans to tax "surplus" advertising revenue earned by private television stations.

The move, part of a complex legislation being drafted to bring French broadcast law into the digital age, is certain to infuriate France's private TV executives, who contend that more taxation is the last thing they need in their effort to build internationally competitive media companies.

Trautmann, in a speech delivered at the MIPCOM TV market and in remarks afterwards, declined to specify how deeply the tax would bite into the profits of TF1 and M6, the private channels most significantly affected.

The tax is linked to a government plan to cut the amount of advertising allowed on public TV from 12 to 5 minutes per hour.

The plan is expected to cost the state-run channels -- generalist France 2, regional France 3, educational La Cinquieme and cultural La Sept/Arte -- about 2 billion francs ($365 million) a year in lost ad revenues.

Some of the advertising that would have gone to the public channels is expected to bounce to TF1 and M6.

These revenues are what Trautmann was referring to when she said, "I want to assure you that the government will take all necessary measures to avoid 'undue' enrichment," adding: "A tax will be instituted on these surplus resources."

Money earned through the surtax will go into the French government fund that subsidizes film and TV producers, the minister said.

Trautmann pledged that the government would provide the public channels with "the money necessary" to compensate for the missing ad revenues and to produce about 350 additional hours of programming per year to fill the minutes previously filled by commercials.

This money will presumably come from the state budget, meaning taxpayers will foot the bill -- although Finance Minister Dominique Strauss-Kahn and Prime Minister Lionel Jospin are expected to divert budget funds from other projects to avoid raising taxes.

Trautmann said the measures would not take effect until the year 2000.

Parliament will receive the first half of the media bill, on public TV, at the end of this year if all goes well, and the second half, on private channels and new techologies, sometime in 1999.

Executives at TF1 and pay-TV Canal Plus declined to comment immediately on Trautmann's announcement, saying they needed to study the fine print before deciding how to react.

But industry sources said the tax would anger TF1 and M6 -- even if they stand to reap extra advertising from the overall measures.

As for Canal Plus, which has tight limitations on the space it can devote to ads, the tax is expected to have a minimal effect.