VAT on reading: Latvian experience from 2009

Renate PunkaHead, Council of Literature and Culture,

Latvian Ministry of Culture

Agenda

Brief history Immediate effect Delayed effects Does VAT make a difference? Lessons learned Latvian publishing industry in 2010

Brief history November 29, 2008

December 12, 2008

December 18, 2009 – July 23,

2009 August 1, 2009

Idea of raising VAT first announced publicly by Minister of Finance

Parliament vote about VAT (5% goes up to 21%)

Lobbying for reduced VAT

Reduced rate (10%) for books become effective for all original works

Immediate effect

Frozen projects, laid-off employees, cancelled contracts

Sharp decrease of sales and new orders

Desparate activities of publishers and booksellers to create cash-flow

Debts to tax institutions

Delayed effectsStatistics of 2009: Number of new titles per annum – lowest

in the last decade (2244, decrease from 2008 – 23%)

Total print-run of new titles – lowest since 1992 (3,5 mln copies, decrease from 2008 – 33%)

Distorted proportion of “ healthy” sales vs SALES

Decrease of average price per copy

Does VAT make a difference?

Jan–Jul’09 Aug-Dec’09 Average in 2009

Decrease in sales (publ)

-43% -19% -32%

Decrease in sales (booksellers)

-48% (some: 60-70%)

-22% -36%

Average RRP per copy in 2008

LVL 7,26

Average RRP per copy 2009

LVL 5,29

Lessons learned Lack of proper statistics – obstacle

to prove the miscalculations of state officials

Books have no price elasticity (RRP vs purchase value)

Reduced VAT – the only real instrument to keep industry competitive (esp. in times of downturn)

Latvian publishing industry

in 2010 A year of reading and More than

one life initiative (www.vairaknekavienadzive.lv)

Reading promotion campaign Attention! Boys Reading!

Libraries as the substitute for regular book buying: pros and cons

New lobbying campaign for low VAT

For more information, please, contact:

Renate Punka: renate.punka@jr.lv

Latvian Publishers Association: lga@gramatizdeveji.lv

THANK YOU for attention!