Sky Italia protests over tax hike

Unfairly targets pay TV operators, Sky argues

LONDON -- Rupert Murdoch's Sky Italia satellite service is lashing out over the Italian government's decision to double VAT to 20% on the country's pay TV subscriptions, arguing that the ruling unfairly unfairly favors Silvio Berlusconi's Mediaset, which has a much smaller pay TV element.

Sky Italia CEO Tom Mockridge branded the decision "a great surprise" and said it will hit Italian customers as the economy heads for a downturn, amounting to an extra tax burden of "roughly 500 million euros."

Mockridge warned that the move could potentially mean that Sky Italia would be forced to curtail its investment in movies and sports rights if it impacted subscriber numbers.

"We'll have to see if any subscribers decide to cancel their contracts because of the tax increase," he told Italian daily Corriere della Sera.

"I hope not but I can't rule it out," he added, warning that "if the subscriber base shrinks, we'll have to cut back on investments, including the purchase of broadcasting rights for films and sports events such as football."

The News Corp.-owned satcaster controls 91% of the Italian pay TV market, and Mockridge said that the protest has the support of the News Corp. CEO and that the company was prepping "a media campaign to warn our subscribers about the increase in VAT."

The announcement that VAT sales tax would be doubled on pay TV was made as part of an emergency fiscal stimulus package announced Friday by the Italian government.

The government also announced a 25% tax duty on movies showing explicit sexual acts, as part of the stimulus package, prompting erotic movie director Tinto Brass to brand the tax "devastating and disastrous."

"Obviously they don't want people to have fun," he told the Times newspaper.