Posted: Tue., Feb. 18, 2003, 3:57pm PT

IFPI eyes tax break on music

Study: Consumers would buy more if VAT were reduced

By Andy Stern

BRUSSELS -- The music industry is following the video industry by urging the European Union to cut the value added tax it slaps on sound recordings.

Last week, the VAT Video Coalition asked the EU to allow member countries to reduce VAT on videos and DVDs, just as they can on cultural items such as books, cinema tickets and museum tickets.

Now music industry body the IFPI, representing recording industry majors including Warner, Universal, EMI, Sony and BMG, has produced a survey arguing that reducing VAT on sound recordings would give Europe's music market a much-needed shot in the arm.

The study found that 60% of consumers aged over 16 would buy more CDs if VAT were reduced. The increased sales would make the change pay for itself within 1-2 years. Cheaper CDs would also make consumers less inclined to buy pirate recordings, which generates no VAT at all for the hungry taxman.

Like the video industry, the recording industry is campaigning hard as the EU prepares to revise its VAT rules, which impose a tax of 16%-25% on sound recordings. This compares to 5% and up for products classified as "cultural" like books, magazines and movie tickets.