Sky Italia hit by tax hike

Berlusconi government changes rules

By MICHAEL DAY

The unpredictable relations between rival media giants Rupert Murdoch and Italo Prime Minister Silvio Berlusconi took a dramatic new turn over the weekend, when it emerged that Sky Italia would be hit hard by the removal of a key tax break.

Berlusconi’s government, which controls Sky Italia’s archrival, Mediaset, announced that pay TV subscriptions will no longer benefit from the lower 10% Iva (value-added) tax band, which was introduced to encourage new-media business. Instead, the 20% rate will apply, as it does for other services.

The move, which forms part of the government’s response to the economic crisis, could raise another $340 million a year from Sky’s 4.6 million Italo subscribers, according to estimates in the respected Il Sole 24 Ore financial daily.

But a Sky spokesman described it as a “move in the wrong direction” in a period when the “government ought to be increasing people’s spending power.”

Paolo Gentiloni, media spokesman for the opposition Democratic Party, said the move amounted to “a blitz against the main private rival of Mediaset.”

Mediaset will be less hard hit because its pay-per-view services already attract the 20% tax rate. However, its pay-monthly services such as Premium Gallery and Disney Channel, which enjoy the lower 10% band, will also be subject to the tax hike -- prompting Mediaset to issue a statement expressing its disappointment.

And Berlusconi was quick to make political capital out of it. “This shows they’ve invented the conflict-of-interest stuff,” he said.

But observers noted there will be less moolah, too, for Mediaset’s other great rival, pubcaster RAI. The new economic package will see its license fee frozen in 2009.