The music sector joins forces at Midem to urge a VAT reduction on sound recordings across Europe

January 19th, 2003, Cannes

Organisations from across the music sector joined forces to urge the European Union to reduce VAT on sound recordings, at the international music market in Midem today.

Representatives of authors, composers, music publishers, entertainment retailers, independent and major record companies, urged an end to the blatant cultural discrimination against music, during a conference organised by the European Music Office (EMO). The EU currently sets VAT on sound recordings as high as 25 per cent, while other cultural goods have rates upwards of 5 per cent. vThe music sector called on the European Commission to propose a reduction of the VAT rate on recorded music, as the EU prepares to revise the 6th VAT Directive in the first half of 2003. This demand received support from the French government that recently appointed former Culture Minister, François Léotard, as envoy for a VAT reduction on CDs.

Mr Léotard was a driving force behind a previous cut in VAT on sound recordings in France. Speaking at Midem, he said: "The first decrease in VAT on recorded music in France in 1986 proved to be a success, both in economic and fiscal terms. I am convinced that a VAT reduction on CDs across the Member States would also bring great benefits at European level."

Music in all its diversity plays a vital role in European culture and society. It is the main way that many people, particularly the youth, experience EU culture. However, this is not reflected in EU tax policy.

Recorded music is unfairly treated in comparison to other cultural products and services that currently benefit from reduced VAT rates such as books, newspapers, magazines, entrance tickets to cinemas, museums and zoos. VAT rates on CDs in the European Union currently range from 25% in Denmark and Sweden to 15% in Luxembourg.

To achieve a reduced rate for music, the EU needs to add sound recordings to Annex H of the VAT Directive, which lists all cultural goods and services benefiting from a reduced rate. This requires a proposal from the European Commission, followed by a unanimous decision by EU Finance Ministers.

At the Midem conference, music professionals emphasised that a VAT reduction would help boost sales and revitalise the entire sector. A VAT cut would also give a break to a sector that is currently fighting back against an epidemic of piracy. Music piracy is costing thousands of jobs and threatening both cultural diversity and investment in new talent.

The event was the latest initiative in the "Give Music a Break" campaign which brings together eight music organisations in a VAT Coalition*. The Coalition has stressed that the benefits of a VAT reduction would be maximised for European consumers. Any cut in VAT would offer a possibility of lowering the cost of CDs.

Professor Becker added: "The promotion of cultural diversity is one of the main challenges of the campaign we are now waging. A reduction of VAT rates on CDs would help make new areas of music more accessible to everyone, especially young people."

EU Member States would have the option of lowering VAT on CDs if sound recordings are added to Annex H of the VAT Directive, but they would not be obliged to do so. However, unless sound recordings are listed in the Annex, the governments that wish to cut VAT on recorded music will not have the option to do this in their own country.

An increasing number of EU governments are coming out in favour of treating sound recordings as cultural goods from a VAT viewpoint.

*The VAT Coalition comprises:

EMO - European Music Office
GERA-EUROPE, Global Entertainment Retail Association-Europe
GESAC, European Grouping of Societies of Authors and Composers
ICMP/CIEM, International Confederation of Music Publishers
IFPI, Representing the recording industry worldwide
IMMF, International Music Managers Forum
IMPA, International Music Publishers Association
IMPALA , Independent Music Companies Association

For further information, please contact:

Francine Cunningham, IFPI, Tel: +32 (0)2 511 92 08,
Mobile: +32 (0)478 261995, francine.cunningham@ifpi.org;

or Philippe Kern, Impala, Tel +32 (0)2 289 26 00,
Mobile +32 (0)475 868686, pkern@kernnet.com