VAT for Beginners

 Mediapart, the French online journal known for its investigative scoops and the quality of its analytical pieces, is in trouble. The problem is to do with VAT – the tax collector has decided the journal owes €4.1 million – but it goes much deeper. At the root is an argument of principle, conducted in the open by the editors for several years, about fair competition between print and online newspapers. Mediapart insists it should be entitled to the preferential VAT rate reserved for print media: a derisory 2.1 per cent as against the standard rate, which rose last year from 19.6 to 20 per cent.

Since it was launched in 2008, Mediapart has been operating its VAT regime at 2.1 per cent, having consulted widely, and been given assurances – in Paris and Brussels – that a full VAT rate for online-only journals would be unfair and anachronistic: it was only a matter of time, they were told, before the rules caught up with the reality of online journalism. Mediapart is certified by the French state press regulator, another point in its favour, since the lower rate applies to all the papers and journals on the regulator’s books. (Many of them have busy, sophisticated websites, but there’s no two-tier VAT regime to reflect the fact.)

None of this matters once the tax bill lands on the accountant’s desk, and it has: seven years’ arrears plus a 40 per cent surcharge. Payment of the surcharge is on hold, but not the principal; as the decision goes to the courts, €2.5 million must be handed to the government. The journal may well get through this dark patch, but it’s calling for help to keep its (remarkable) operation going in the meantime. Donations can be made here.

 Mediapart isn’t owned by a press baron or a large consortium and doesn’t sell advertising space. The reader pays, by subscription. The journal gets none of the benefits conferred on print media by the French system, which date back to 1796, when favourable postal rates were set for distribution. Nowadays, regulator-approved print media benefit not only from the basement VAT rate but from help with subscriptions to Agence France Presse, the wire service. AFP leans early and often on Mediapart stories, but doesn’t always acknowledge its colleagues’ hard work. French print media still get a massive shot in the arm to meet delivery and distribution costs. The total value of direct state assistance is about €400 million a year; indirect or hidden costs via exemptions are higher still.

In recent years, L’Humanité, the Communist Party newspaper, has scored well in terms of subsidies per copy – between 40 and 65 cents; current newstand price €1.70 – but the main beneficiaries, in terms of total receipts, are Le Figaro and Le Monde with about €16 million apiece in 2013.

 Mediapart’s non-subsidised, reader-funded business model makes it a truly independent venture, unlike Le Monde, which is part of a conglomerate controlled by three individual investors and the Spanish media company Prisa, or indeed Le Figaro, part of the Dassault empire, built on aircraft and munitions. Libération now has two key shareholders, both tycoons, and sits uneasily in a media group including the weekly L’Express and i24news, an Israeli TV news channel.

 Mediapart is a pioneer on the French scene. It has broken several major corruption stories. Five years ago it dug deeper into the Liliane Bettencourt affair than others were willing to go, and fingered Eric Woerth, Sarkozy’s campaign finance wizard in 2007. Woerth resigned and a criminal investigation followed. In 2012 Mediapart announced that Hollande’s budget minister, Jérôme Cahuzac – assigned by the president to chase down tax defaulters – had money salted away in Switzerland and Singapore. The full wrath of the administration descended, but Mediapart stuck to its guns and Cahuzac resigned in 2013.

Today a sombre but resolute Edwy Plenel, senior editor of Mediapart, suggests a link between the Cahuzac scoop and the decision to strike at the source of the online paper’s independence: its modest but healthy bank balance – €4.7 million – built on careful management of subscription revenues. The government drew a line under amicable negotiations about a fair tax rate for Mediapart in 2013, Plenel argues, a year after Mediapart broke the Cahuzac story. The decision was taken by Cahuzac’s former colleagues at Bercy, who’d stuck by their minister when denial looked like the best option.