Biz's Battle For Lower Tax Makes Strides

EU Culture Ministers Support Call To Reclassify Music
This story was prepared by Emmanuel Legrand, editor in chief of Music & Media, and Mark Dezzani.
BRUSSELS--The European Union's culture ministers are formally supporting a call to classify recorded music as a cultural good and thereby make it eligible for a reduced rate of value-added tax (VAT).
The decision is a landmark for the music industry, which has long argued for a reduction. At present, because music is not deemed a cultural good by the European Commission, national governments within the EU are obliged to levy higher VAT rates, which are as much as 20% in some member states.
The proposal for a 4% VAT rate across the EU was put forward by Italy's culture minister, Walter Veltroni, at a meeting of EU culture ministers Nov. 24 here.
The council of ministers also agreed on a proposal to promote 'a European musical domain.' A statement issued by the ministers after the meeting affirmed that 'music is a fundamental element of (EU members') cultures and represents one of the most prevalent means of expression in today's life.'
The council pointed out that 'music is a well of employment worth tapping, especially for the young.'
The VAT issue has been a longstanding thorn in the side for the various national record industries across Europe. Because VAT is scheduled by the EU and is, in large measure, out of the hands of national governments, the argument was taken to the heart of European government in Brussels two years ago with the establishment of a pan-European campaign by French labels' body SNEP (Billboard, July 13, 1996), a move endorsed by the French government.
The music industry's arguments received a major boost in October when Veltroni promised Italy's labels that he would raise the issue of VAT at an EU level following protests over a recent rise in the tax on records in Italy to 20% (Billboard, Nov. 8).
The Italian proposal, which was backed by France, was supported by ministers from most EU member states in the council meeting, strongly so by the representatives from Spain and Greece. Denmark opposed any reduction in the VAT rate on music and Germany abstained from voting. According to Veltroni's office, the German culture minister was absent from the meeting.
Veltroni comments, 'A reduced VAT rate for records will benefit young consumers and the unemployed, while the resulting increase in sales will mean that tax revenues will hardly be hit.'
The International Federation of the Phonographic Industry (IFPI) welcomed the council proposal, describing it as 'a step in the right direction.'
However, even with the support of the culture ministers, which is an important political gesture in the European context, the fight for a lower VAT rate is not won yet. It is ultimately the EU's finance ministers who will have to agree to any changes in VAT rates. The issue will be decided in the context of harmonization of VAT rates across the EU in 1999. However, Italy's finance minister, Vincenzo Visco, has already voiced support for the initiative, and Veltroni says he will be meeting with EU Internal Trade Commissioner Mario Monti to secure his support.
But the EC has so far been reluctant to support any drop in VAT, arguing that it would result in massive losses of tax revenue for member states; the commission is also believed to fear that other industries would ask for the same preferential treatment. 'It will be very difficult to win this fight,' admits a senior German industry executive.
Also at the Nov. 24 meeting in Brussels, culture ministers unanimously agreed to back a proposal from Luxembourg's culture minister, Erna Honnicot-Schoepges, asking the EC to draft a program of action for music during 1998 to encourage the circulation, exchange, and broadcast of music within the EU.
The council asked the commission to make proposals in the following fields:
to improve music education and training for musicians and music professionals;
to provide wider access to music to the public;
to search for ways to spread musical creation and repertoire across the different EU countries; and
to develop and improve mutual information on music between EU member states. The ministers mentioned the possible creation of a European information center on music.
The commission will present a text next year on behalf of the culture ministers that will serve as a framework to encourage repertoire and performance exchanges between EU countries, with the view to eventually creating a single 'European music domain.'
'At last the ministers are realizing the importance of music in Europe,' says Jean-Francois Michel, director of the Brussels-based lobbying group the European Music Office. 'The themes that were discussed (at the meeting) are those we have been advocating for some time. It is an important step toward Europe having a real policy on music matters.'
The text will have to be approved by each EU member state and then presented to the European Parliament before being implemented. 2000 is being mentioned as a reasonable time frame for the plan to be executed.
Adrian Strain, spokesman for IFPI's Brussels offices, says that both decisions from the culture ministers 'are a step in the right direction.' Strain also welcomes the meeting's final document, which stresses 'the economic importance of the music industry.'
Strain points out that IFPI 'is not interested in subsidies but rather in a policy that will help the industry to do its business in a better environment.'
He elaborates, 'Concerning a global policy, we concentrate our interests on three main points--we want a strong EU policy against piracy; we need to ensure a proper rights environment for the digital era, through the copyright directive and with the ratification of the (World Intellectual Property Organization) treaty; and we want an equitable treatment on VAT. We'll be working with the commission and fuel it with our views on what we believe is an unfair discrimination.'

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