France's public TV tax effort squashed

European Commission warns against Internet tax

BRUSSELS -- The European Commission has poured cold water on French President Nicolas Sarkozy's plan to use a tax on Internet service providers and telecommunications operators to fund public television stations.

If the tax is slapped on Internet users, it would be illegal under the EU's electronic communications law, commissioners have warned. And if the receipts are pumped into public broadcasters, it would be a government subsidy, and likely inadmissible under EU state aid law.

More politically, the commission warned that new taxes on IT and media services will stymie investment in the sector, and fly in the face of EU-wide efforts to cut Internet and mobile rates.