Industry Asks For Lower Vat

The music industry is forming a coalition to lobby European Union politicians and legislators to reduce VAT (sales tax) on sound recordings.

Launching a cross-industry coalition in Brussels Nov. 2 with the Give Music a Break campaign, the music business united to condemn what it claims is "the blatant cultural discrimination against music that sets VAT on sound recordings as high as 25%, while other cultural goods have rates upwards of 5%." The lowest VAT rate for CDs in the EU is Luxembourg's 15%.

A spokesperson for the International Federation of the Phonographic Industry (IFPI) explains that the European Commission is looking to put forward proposals in first-quarter 2003 to amend the VAT legislation. She explains, "Our first step is to try to make sure the commission proposes to add sound recordings to the cultural product list."

The VAT Coalition comprises the European Music Office, the Global Entertainment Retail Assn. Europe, the European Group of Societies of Authors and Composers, the International Confederation of Music Publishers, the IFPI, the International Music Managers Forum, the International Music Publishers Assn., and the Independent Music Companies Assn.

The coalition is pushing the concept that a sales-tax reduction would help revitalize the entire European music market. Sony Music Europe president Paul Burger urges governments to examine France's experience when it cut VAT on music in 1997 from 33.6% to 18.6%, which led to French consumers almost doubling their record purchases. Burger says, "If consumption rose by 40%, it would more than offset the loss in VAT receipts."

The EU is preparing to revise the 6th VAT Directive in the first half of 2003.

A number of EU member governments are already open to the idea of treating sound recordings as cultural goods from a VAT viewpoint. The European Parliament also recommended a reduced VAT on cultural goods and services earlier this year.