Read Their Lips: No Fewer Taxes

PARIS (05/12/2000) - If you're ever stuck for a topic of conversation with a Frenchman, talking taxes is a sure-fire way to start a heated debate that will burn on until the small hours.

But the price of this easy talk is high -- for the French. The country has a bewildering array of income taxes, each calculated on a different basis. Then there are the three levels of sales tax, and the taxes on property rents -- for both owner and tenant.

Indeed, it seems that whenever the government needs money for a special project, it imposes a new, "temporary" tax on income. There is talk, for example, of a tax to pay for reconstruction after the violent storms that swept the country in December, damaging electricity distribution networks and decimating the nation's forests.

Rather than introducing another unpopular tax, the French government might choose to raise money by selling concessions to exploit natural resources belonging to the state - for example, radio spectrum.

The U.K. government recently raised US$35 billion, some 2.3 percent of its gross national product (GNP), in this way through the auction of five licenses to operate third-generation (3G) mobile telecommunications networks.

Already in some European countries, more than half the population uses mobile phones to talk or exchange text messages. The next stage is to let them surf the Web, watch movies, and access other services while on the move.

Thirteen bidders, each desperate for a share of the revenue from future mobile communications services, drove up the price of the U.K. 3G licenses. The licenses were widely expected to sell for less than $8 billion. While the U.K. chancellor of the exchequer considers what to do with his unexpected windfall, his counterparts in other European countries are re-evaluating their options.

Italy, for one, decided on May 9 to add a second stage to its licensing process: As well as evaluating submissions on technical merit, it now plans to invite the most promising of these candidates to bid for the licenses. The government reportedly hopes to raise as much as $12 billion in the process.

France had previously been committed to the idea of the so-called "beauty contest" method for awarding the licenses, in which a panel selects those applicants likely to provide the best service to users. But the lure of all that money; which could be used to reduce taxes in other areas -- or pay for all that storm damage -- is proving too much. Two weeks ago, the Minister of Finance said that he would make a decision within the next month on whether or not to hold an auction for the licenses.

Last week, the lobbyists were out in force. Industrialist Martin Bouygues, head of construction group Bouygues -- and owner of one of France's three mobile phone networks -- took to the front page of national newspaper Le Monde with a strongly worded attack on the auction concept. He argued that far from reducing taxes, the cost would eventually fall back on the consumer in higher charges for mobile phone users. The next day, the head of the telecommunications regulatory authority spoke out against plans for an auction, saying that the beauty contest previously proposed would result in the best service to users.

Whether it is better to fill the state's coffers by holding an auction, or to ensure quality of service by licensing the best rather than the richest, is likely to be debated by France's chattering classes for some time. If only they would use their mobile phones to talk about it, at least the owners of the country's mobile phone networks will be happy.

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