The European Union (EU) has quietly dropped plans to introduce a tax on phones capable of receiving video, a move which mobile TV leaders regarded as potentially calamitous for the viability of the industry.

Late last year, news agency Reuters revealed that the European Commission (EC) was intending to introduce a 14% tax on mobile handsets that include a TV receiver. On 10 December 2008, the EC sent member states a formal proposal to reclassify some phones as "multi-functional devices". Such reclassification would have incurred an additional 14% tax on phones with TV receivers.

Reaction in the industry was fierce. "This would definitely be a killer," Reuters quoted Azzedine Boubguira, head of marketing at Paris-based DiBcom as saying. "No-one will pick it up. No-one. We were thinking: will people be ready to pay for the subscription, but now they are not being able to buy even the handset"

Reuters has now reported that reacting to pressure, notably from Nokia and Sony Ericsson, the EU will halt any such plans.

Sweden, which holds the rotating presidency of the EU, was reported by Reuters as realising that at an EU meeting, a large majority of the countries voted for the duty-free treatment of mobile phones to continue in the Customs Code Committee's meeting.

"We need more products and businesses free of tariffs, not less, and therefore today's decision and the backing that was achieved is a very positive signal," Swedish Trade Minister Ewa Bjorling said in a statement.

"Nokia is very pleased that the Commission is taking this view and that the uncertainty surrounding the issue is now being removed," Reuters quoted a spokesman for Nokia.