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Publishers want 5% VAT for books; ministry’s estimates are exaggerated

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Reduction of VAT on books to 5% will leave only a slight impact on the state budget, but at the same time it will help stabilize the industry, said Latvian Publishers Association board chairperson Renāte Punka in an interview to Latvijas Radio on Thursday, 8 August.

She notes that the current situation for publishers is relatively positive and offers some stability. Turnover of book stores is on a rise. However, concerns come from growing costs. According to Punka, the average print run of books in Latvia had dropped below 1 000 for the first time.

This is why it may be a good idea to apply a 5% VAT rate instead of 12%. The chairperson stressed that this step will allow preserving and promoting stability in the book publishing industry.

She added that the average VAT for books in EU member states is 7%, whereas in certain countries it is 5%.

Punka also mentioned in her interview that book publishers believe Finance Ministry’s estimates on the impact reduced VAT on books will have on the state budget are exaggerated. The ministry has calculated that this step would cost the state budget several million euros next year. Initial estimates of book publishers show that this step would require less than one million euros from the state budget. On top of that, loose funds would return to the economy in the form of wages and increased turnover, explains Punka.

Additionally, it is necessary to continue the discussion on application of reduced rate for audio and electronic books, publishers say.

Meanwhile, the coalition’s tax policy development committee will continue discussions. The committee also expected from Finance Ministry an assessment of fiscal influence of a possible VAT reduction for so-called healthy public catering services and books.

New Unity representative in the committee Ints Dālderis had previously explained that the development committee does not make decisions and that it is necessary to evaluate financial influence on the state budget before any decisions can be made.

New Unity has deputies have different opinions if it is worth reducing VAT for so-called healthy catering offers from 21% to 12%. Dālderis says he is personally in favour of this step.

A proposal has also been voiced to reduce VAT for books from 12% to 5%. Culture Ministry’s representatives have explained that it would be a good way to support book publishing industry,

said New Unity representative. At the same time, he noted that the question is if this is an effective mechanism. The politician said that previously the tax rate was reduced to 12%, but because another reduction is proposed, it is clear this approach does not work. Another question is if publishers even pay VAT at an appropriate level, because some amounts are paid in pre-tax, which leads to VAT overpaying, Dālderis says.

The politician noted that offers have to be properly evaluated. The topic also needs to be discussed among ministries and political parties. This also applies to the funding requests ministries have submitted for the 2020 budget, as New Unity’s representative.


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