The Tax Department imposes a new fine on SFR for having applied the wrong VAT rate on Internet packages billed between June 2016 and February 2018. The operator’s tax adjustment amounts to a record amount: 420 million euros. They come on top of the previous fines imposed on SFR. The total amount the company will have to pay has now reached 830 million euros.
It was a clever trick on the part of SFR. Apply lower VAT on service packages subject to different rates in order to increase tax-free turnover. How does it work? It’s quite simple. In an enriched triple-play offer, there is Internet, television, telephone and some value-added services, such as the press. The press is subject to a VAT rate of 2.1%. Television is subject to 10%. And telecommunications 20%. SFR has applied press VAT to the entire subscriber bill (and not to 5 or 10% of the amount).
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Thanks to this, SFR lowers its VAT declaration and, at the same time, increases its own income since the amount deducted from its subscribers did not benefit from this reduced taxation. In 2018, SFR thus officially won, on the back of the State and its subscribers, 20 million euros per month. SFR’s trick was so good that other operators (including Orange) imitated the operator, attracting the attention of the Ministry of the Economy, whose loss of earnings then amounted to several hundred million euros. by operator. Free was one of the only ones not to indulge in it, Xavier Niel believing that it is a “scheme”.
The Tax Department still imposes a record tax adjustment on SFR
In 2018, Bercy passed a law prohibiting this practice. And she ordered a tax adjustment from the tax authorities. A recovery that covers the years 2018, 2017 and even 2016. And the fines are rather steep. SFR has already received several adjustments over this period, including a first of 245 million euros in 2020, for a cumulative amount which already reached 410 million euros end of 2021. But a new fine was imposed. And she reaches this time 420 million eurosbringing the total sum to 830 million euros.
This sum does not relate solely to VAT fraud. It also relates to errors made by SFR on income tax. The operator deducted from its imports the deficits of the acquired companies (such as Numericable) and the interest on its own debt. Thanks to this, the operator has divided almost by 10 the amount of its tax on profits. The State considers that these deductions are not justified.