Netflix, Inc. (NASDAQ:NFLX) shares were reeling in Monday morning trading, as news broke of a potentially harmful streaming media tax’s approval in France.
The far-reaching tax, which was originally designed to extract more tax revenue from YouTube parent Alphabet Inc, would also apply to Netflix. From Fortune.com:
French lawmakers voted in favor of a “YouTube tax” that would apply a 2% levy on all streaming video, and a 10% rate on any online films that are pornographic or capable of inciting violence.
The proposed tax, which passed France’s National Assembly but requires further approval to become law, would also apply to companies like Netflix NFLX -2.48% and Vimeo, and would be calculated based on subscription or advertising revenue.
Details on the tax are still largely unknown, as is how exactly regulators would go about enforcing it. Thankfully, the measure still faces several regulatory hurdles before it can actually go into effect:
[The] proposal’s final success is uncertain. Similar measures proposed in 2010 failed to become law and, as another publication notes, the “YouTube tax” would have to be approved by the European Commission.
European regulators have been cracking down on U.S.-based tech firms as of late. Companies from Apple to Google to Facebook have enjoyed massive success in European markets, but wind up paying little in terms of local taxes. This new measure is designed to try and force high-profit tech companies into paying their fair share.
Meanwhile, Netflix is due to deliver its latest earnings report today after the closing bell. Investors will no doubt zero in on the company’s waning subscriber growth, which has kept a tight ceiling on its share price over the past year.
Netflix shares fell $2.57 (-2.53%) to $98.90 in Monday morning trading. Year-to-date, NFLX has plunged 13.52%, versus a 4.33% gain in the benchmark S&P 500 during the same period.