UK Vat decreases to Sky

Senator Joe O’Toole: The last time RTE was in, we were stuck in an argument across the table. This was a superb presentation and dealt with many points. An issue has been raised by the colleagues who have spoken. We spent months establishing copyright legislation seven or eight years ago. I do not know the answer to these issues. I support the point made by Deputy Coveney about artistic rights. I am sensitive about that but I do not know the answers. RTE has answered the points well. The point about the BBC selling only 10% onwards is important. We have a job to do. We must examine copyright legislation. This should not be left as free as it is. Legislation should make it clear what we expect of RTE or any other body in this situation. If RTE was to tell us that a certain amount of taxpayers’ money was supporting creative artists in other jurisdictions, we would not be happy. We would bury the delegation and I would be the first to do so. RTE is looking after our interests very well.

The witnesses have outlined again the support for the two orchestras, the choirs, Lyric FM and other matters in terms of the public service aspect. It is important that RTE sees it as part of its remit to develop artistic creativity and endeavour outside its own gig. RTE argues vehemently that it is doing so and I do not know enough to contradict the witnesses but I agree with the members who suggested RTE should go the extra mile on that. There should be a legislative base to do that.

I agree strongly with the point made by Deputy McManus about free-to-air access via satellite. I have written to RTE many times and Mr. Goan will be pleased to hear that I have a letter ready to go to the Chairman of the committee. It says that the amount of VAT that Irish people are paying to Sky for satellite is €100 million, all of which is going to the UK and only because RTE has done a deal with Sky preventing any other provider

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Mr. Cathal Goan: That is absolutely wrong.

Senator Joe O’Toole: I would be happy to be contradicted. The fact that Sky is the only company that can provide RTE on satellite is depriving this jurisdiction of €100 million in VAT. Many people receive satellite because of the better reception and would like to receive RTE in this way. Money that would go to the State is being lost. RTE is at the end of its contract with the providers, Sky, and there should be an open market in providing free-to-air satellite access to RTE, TV3 and TG4.

What is this Information Sheet about?
This Information Sheet explains the effect on electronically supplied services and radio and TV broadcasting services of changes to the EU place of supply rules following implementation of the VAT on E-Commerce Directive (2002/38/EC).

Why are these new rules being introduced?
Under the rules in force until 1 July 2003, most electronically supplied services, including digitised products, and all radio and TV broadcasting services, were subject to VAT in the country where the supplier belongs. That meant UK businesses were required to charge UK VAT on those services to all their customers, irrespective of their customer’s location. Similarly, businesses in other Member States were required to charge VAT at their local rate. However, non-EU businesses were not required to charge EU VAT on supplies to EU customers. The changes removed this distortion of competition so that EU and non-EU businesses are taxed in a similar way.

Setanta saves millions in Luxembourg tax move
Tom Lyons

PAY-TELEVISION broadcaster Setanta Sports has slashed at least £17m from its tax bill by setting up a subsidiary in Luxembourg. The windfall will boost the firm’s valuation as speculation increases that a sale of the company is likely.

Over 1m British and Irish subscribers pay into Setanta’s new Luxembourg subsidiary called Setanta Sports Sarl.

Setanta pays “super reduced” Vat of only 3% on subscriptions routed through the grand duchy against 17.5% charged in the UK and 21% in Ireland.

Setanta has also set up subsidiaries to support its entry into the Canadian and Australian markets this year. Its ultimate parent company remains in Ireland, where more than half of its 450 staff are employed.

JP Morgan, which advised Setanta on its bid to screen Premiership matches, placed a value of up to £1 billion on the company in 2006 despite the broadcaster’s losses. Setanta has since won further sports broadcast rights, pushing its valuation even higher.

ESPN, the American sports giant, indicated earlier this month it would be “absolutely interested” in bidding for English Premiership football rights when they next become available in 2009. This was seen as a signal to the market that it could be lining up a bid for Setanta. A bid would also see ESPN acquire the British and Irish rights for PGA golf, which Setanta acquired for €150m (£110m).

Setanta said: “Many of the main broadcasters are based in Luxembourg as it offers an attractive fiscal incentive. We established this European base for the company as it becomes more international and expands into mainland Europe.”

Setanta has a total subscriber base of more than 3m, when its partnerships with Virgin Media in the UK and Chorus/NTL in Ireland are included.

Only its 1m direct subscribers are affected by the Luxembourg subsidiary. Assuming all 1m subscribers pay the £9.99 a month minimum subscription rate this equates to revenue of almost £120m.

A British Vat rate of 17.5% on this amount is roughly £21m. However, a 3% “special” Luxembourg Vat rate on the same sum adds up to only £3.6m, indicating Setanta is making a minimum saving of £17.4m from the move to Luxembourg.

But with many subscribers paying out more than £9.99 a month for the full range of services, the savings to Setanta by moving its business could run to more than £20m.