French investigative web site Mediapart, whose reporting brought down a former budget minister in President François Hollande’s cabinet, called for financial help from readers Thursday after being hit with a €4.1 million tax bill in the wake of an audit it said was unjustified.
The French tax authority has given Mediapart two weeks to pay the bill.
While ongoing revenue from the site’s 100,000 subscribers should be enough to avoid laying off any of its 39 staff journalists, paying the bill would empty its cash reserves, halt all development projects and force owners to start reassembling capital reserves from scratch, editor François Bonnet told POLITICO.
“This would bring us back to square one,” said Bonnet, one of four original founders who invested personal funds to launch Mediapart. “For a company that had revenue of €10 million in 2014, this bill is an enormous hit and not one which we think is justified.”
On the surface Mediapart’s tax troubles have to do with a long-running dispute over the value-added tax (VAT) rate it should be paying. Mediapart has argued since its 2008 launch that it should pay the same 2.1 percent VAT rate as applies to all print media, saying there is no essential difference between a print and web-based publication.
The tax authority disagreed, ruling that Mediapart must pay VAT at 19.6 percent, which is the level that applied to non-print media until a 2014 law made the lower rate applicable to online media. The site owes back taxes for the 2008-2014 period.
Mediapart is not the only publication to face an audit. Arretsurimages.net, a website devoted to analyzing television media, received an order to pay €540,000 in unpaid VAT and appealed to its readers for financial support to raise €500,000. In an open letter on its web site, Arretssurimages.net editor Daniel Schneidermann did not allege any political reason for the audit.
The French government, which is struggling to shrink a deficit to reach European Union deficit-reduction goals, has intensified its tax-recovery efforts over the past few years.
The powers that be
However, as in many of Mediapart’s own articles, there is a rich political backstory.
Bonnet said that the site was being punished retroactively for having exposed documents and recordings that led to the ouster in 2013 of former budget minister Jerome Cahuzac from Hollande’s cabinet, in the midst of tax evasion scandal.
Cahuzac originally denied allegations from Mediapart that he had failed to disclose a bank account in Switzerland, and several officials as well as a well-known broadcast journalist defended him publicly. The site then disclosed a phone-tap recording of Cahuzac discussing an account over the telephone and he was forced to resign, in what remains the most significant scandal yet to hit Hollande’s presidency.
Bonnet said the audit was payback for having set Cahuzac’s downfall in motion and exposing other scandals, like the so-called “Bettencourt affair,” that troubled former president Nicolas Sarkozy until he was cleared of all wrongdoing earlier this year.
“The decision [to conduct an audit] came from the highest levels of administration at Bercy (the French finance ministry), which is made up of many people close to Cahuzac and Nicolas Sarkozy,” he said. “It seems to us that the political powers that be did not necessarily have control over this process and may even have been surprised by it.”
A letter composed by former Culture Minister Aurelie Filippetti, in which she expressed dismay over the audit, underscored Bonnet’s impression that the issue was out of the socialist government’s hands.
Mediapart has exhausted its appeals in the case, but will try to be heard by an administrative court. That will not absolve it of having to pay some €3 million, which is the total owed minus late penalties and interest, Bonnet said.
The finance ministry did not immediately answer a request for comment.
Caught in the crosshairs
It marks the first major financial setback for a web site that has become known as a success-story for subscription-driven journalism, turning a profit over the past five years. Mediapart’s success has also been hailed as a testament to media freedom in France, where many critics lamented a lack of strong investigative journalism culture before its launch.
Under Sarkozy, Mediapart broke several key turning points in the “Bettencourt Affair,” which involved France’s richest woman, l’Oréal heiress Liliane Bettencourt. The affair started with allegations that Sarkozy had received illegal campaign donations from Bettencourt, then morphed into a family feud between warring members of her entourage.
Sarkozy and his former campaign treasurer, Eric Woerth, were cleared of all wrongdoing in the case earlier this year.
Under Hollande, Mediapart revealed the Cahuzac scandal and months later claimed its victim in the president’s entourage, former adviser and speechwriter Aquilino Morelle. He was forced to step down after a story showing that he had received money.
Mediapart has accrued enemies along the way. Critics accuse the site, and other publications like Le Monde, of carrying out political “hit jobs” by publishing excerpts of affidavits and testimonies in ongoing cases that should normally be covered by legal secrecy.
So far Mediapart has managed to avoid ending up at the sharp end of an investigation by keeping attention squarely focused on the suspected wrongdoing of its targets.
That may be changing.