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Last Updated:  Tuesday, 18 February, 2003, 12:53 GMT
VAT cut could boost CD sales
Boy listening to CDs
CD sales in the UK have slumped
A VAT reduction on CDs could boost the struggling recorded music industry in Europe, according to research.

A report, compiled on behalf of the International Federation of the Phonographic Industry, questioned consumers in five countries about their music spending habits.

It found that 60% of people over the age of 16 would buy more CDs if they were made cheaper.

The survey suggests that increased sales would compensate governments for any loss of revenue from a VAT cut within one or two years.

The British Phonographic Industry (BPI) has reported a 4% slump in UK music sales, the biggest downturn since the launch of CDs in the early 1980s.

The industry is blaming piracy, including illegal duplication and distribution by international criminals, for the decrease.

A coalition of worldwide music groups is now lobbying European leaders to reduce the amount of VAT paid on CDs to bring it in line with other hobbies such as books and cinema tickets.

The VAT Coalition represents composers, performing artists, publishers and retailers.

Significant reduction

VAT on sound recordings is set between 16% and 25% while other cultural products, including magazines and entrance to zoos, starts from 5%.

The research has been launched to coincide with a summit of EU finance ministers in Brussels.

It indicates that if VAT was significantly cut then Italy could see a rise in music sales as high as 160%, while the UK could benefit from a 110% increase.

Findings suggest the biggest potential increase of sales would be from existing CD buyers who said they would purchase the same amount again if VAT was significantly reduced.

In Italy 82% agreed there should be a VAT reduction on music, while 72% in the UK felt the same.

VAT varies from country to country with Sweden paying 25%, UK 17.5% and Germany and Spain on 16%.

To reduce the amount of VAT paid on sound recordings there would have to be a change in the law agreed by all EU finance ministers to class them as cultural goods.

Slump for UK record industry
12 Feb 03 |  Entertainment
Piracy 'threatens 600,000 jobs'
20 Jan 03 |  Entertainment

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