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IMPALA calls for review of VAT on music

By | Published on Thursday 2 June 2011


“Why is there VAT on records but not books?”, you might muse on occasion. Well, pan-European indie label trade body IMPALA has been musing just that, and has now called for a reform of the sales tax system regarding cultural goods in a submission to a European Commission consultation.

IMPALA says that in different European countries VAT breaks are given to different kinds of cultural products, but sometimes not online, and that the variations and inconsistencies just confuse consumers. In its submission to the EC, the trade body told European political types that “all cultural goods and services should be eligible for a reduced VAT rate within harmonised limits – at the very least, the discrimination between music and books should be removed”, while calling for a moratorium on VAT rates online in Europe.

IMPALA Chair Helen Smith told CMU: “In turbulent times for artists and the music sector, vital changes to the VAT system are needed, today more than ever. Europe’s VAT system needs to be logical and serve true European values”.

Of course, the UK music industry has its own VAT issues, with that good old loophole that allows online sellers to sell CDs VAT free if they are based on the Channel Islands, giving them a 20% advantage over mainland operations. As previously reported, moves are afoot to close that loophole – that also stems from European tax law – possibly by publishing a list of products that will not be eligible for the off-shore tax exemption moving forward, a list which would include CDs.

But if VAT was taken off all records, then the unfair advantage enjoyed by offshore mail-order websites would also disappear. Though the idea of persuading national governments to give full VAT exemption for all recorded music products is probably unrealistically ambitious, whatever the situation with books – the publishing sector benefiting from the fact that the VAT exemption on the written word also applies to newspapers, who no government would take on with tax reform.