The French government is planning to introduce tax credit schemes that will benefit record labels. The system would allow labels to offset part of their recording costs through a tax deduction. It is

The French government is planning to introduce tax credit schemes that will benefit record labels. The system would allow labels to offset part of their recording costs through a tax deduction. It is anticipated this measure could bring in-excess of €10 million ($12.27 million) into the sector.

The French minister of culture Renaud Donnedieu de Vabres announced the support scheme during the Midem trade show in Cannes. He said the French government has notified the European Commission of its plans and that it would be integrated into a bill submitted to French parliament in the spring of 2006.

Fiscal schemes such as tax credits need to be notified to the EC as they can transform competition conditions within European Union Member States.

Donnedieu de Vabres said that he was confident this measure will be approved as it falls under an international Unesco charter that authorizes states to set up support schemes if they can promote cultural diversity.

According to the plan, labels will be entitled to tax deductions for production costs and expenses linked to the development of digitization of catalogs. Expenditure on development and digitisation will be limited to €350,000 ($429,000) per recording. Total tax credits per company should not exceed €500,000 ($613,000) per year.

The news was welcomed by industry executives, particularly from the indie sector. "His scheme was on top of our agenda in 2005," says Stephan Bourdoiseau, chairman of indie label's body UPFI, and chief executive of France's leading independent distributor Wagram. "We are very pleased with the speed at which the decision was made. There was a real urgency to act and we are satisfied that the minister has decided to refer the scheme to Brussels."

Universal Music France chairman and CEO Pascal Negre concurs that "it is a decision that goes in the right way." He suggests that this is not incompatible with free market rules and can bear results like in Brazil where the whole music production is financed with a similar scheme.

Bourdoiseau says he anticipates a positive clearance from the European Commission during the year and that the scheme will be retro-active and applicable from Jan. 1 of this year.

He suggests some 100 companies could be eligible for the scheme. "In the past few years some 37% companies of four or more employees in the field have disappeared and there is about 100 companies that fit the definition nowadays," he says.

Bourdoiseau estimates that the initiative could result in some €10 million ($12.27 million) injected into the sector and help produce and develop new artists. He adds that the system "is looked at with much interest by our colleagues elsewhere in Europe."