EURO TV AD TAX PONDERED TO LIFT MOVIE INDUSTRY

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BRUSSELS-The European Union is looking at a tax on TV advertising, among other protectionist measures, to revive its ailing movie and TV industry and to compete better against Hollywood.

The European Commission, the EU's executive arm, last month adopted a "green paper" on audio-visual policy. Without offering specific solutions, the green paper suggested reinforcing controls on-and perhaps expanding-existing quotas of European-made TV programs.

The green paper's most controversial suggestion, however, was that the 12 member states consider imposing levies on cinema tickets, video rentals and TV ad revenues.

The Council of Ministers will vote this fall on a formal report to be prepared by the EU audio-visual and cultural ministers. The report could then become a directive if it receives majority approval from the 12 member states.

Audio-visual Commissioner Joao Deus Pinheiro said that since the industry is state subsidized in Europe, it doesn't have the money to compete on the promotion and distribution front, particularly in markets such as the U.S. and Latin America.

Mr. Deus Pinheiro said European audio-visual exports to the U.S. were extremely low last year-$200 million vs. more than $4 billion in imports from the U.S.

"The single [EU-wide] market only works [in favor of] American productions," he said.

"Levies are absolutely ludicrous," said Michel Deurinck, director general of the European Advertising Tripartite. Mr. Deurinck blamed Washington for focusing political attention on taxes as a way to generate needed funds.

Paul DeWin, director general of the World Federation of Advertisers, doubted the European Association of Advertising Agencies would have to do much fighting to defeat the proposal. "I doubt the [ad tax] will go far because the commission doesn't have that kind of [power], but [taxing] is the easiest idea you can propose."

The green paper's idea of taxing broadcast ad revenues first arose earlier this year when the French government and several lobbyists for producers pressured the EU to create a European fund for a central production system to boost the number of European films on the market. A think tank hired by the commission to find ways of funding such a project suggested taxing broadcast ad revenues.

The green paper suggested the ad tax idea could be worked into the EU's existing "Television Without Frontiers" directive, which requires broadcasters to reserve a majority of airtime for European-made programming, when practical. That directive comes under review in the fall.

Also suggested in the green paper was expanding the TV directive to include a tax on investment in European TV channels and new services such as video-on-demand.

However, industry observers point out that if quotas for video-on-demand were proposed, they would be impractical because the whole idea behind the service is that viewers choose what they watch.

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