MPs to abolish VAT on print media
By : Anna Kocinska
Solidarity Election Action (AWS) MPs who last year supported a bill introducing value-added tax (VAT) on newspapers and magazines now want to abolish the 7% tax, which they say is bad for business.
"Deputies have opened their eyes to what's become of local press; (it) is in trouble," said Jan Maria Jackowski, AWS MP and chairman of the Sejm's Culture and Media Committee, who said he voted against the tax. "We want to restore the 0% VAT on newspapers and magazines. Publications in Braille would also be exempt from VAT."
Last year publishers predicted disaster for publications aimed at readers in small communities, citing in a letter to the Senate that "(Newspapers and magazines) published in gminas and powiats are relatively expensive because of their small circulation and with the introduction of VAT they will become even more expensive, making them less available to readers who are poorer than their counterparts from large cities."
Jacek Leski, publisher and editor in chief of Gazeta Radomszczanska, said last week that the ominous predictions for small-circulation publications were slowly coming true. "In the first two or three months of 2001, the disaster wasn't that obvious but now many local publishers have seen a general increase in publishing costs and their financial situations have been significantly affected," he said. "VAT on local press is simply a death sentence. " After VAT was introduced, Leski increased the price of the 24-page Radomsko-based weekly by about 7%, to zl. 1.7. "I thought it would compensate for the tax, but it didn't," he said.
According to Roman Wolkowiak, general director of the Press Publishers Office (IWP), MPs are having second thoughts about the tax because they've realized the levy has led to a sharp drop in readership and sales.
One of the main arguments in favor of the tax last year was its compatibility with European Union (EU) regulations. Under EU law, a 0% VAT rate is only applicable to goods and services being exported. "It wasn't necessary to introduce such a tax without a transition period," Wolkowiak said. "We're not entering the EU now so there was nothing that made us introduce (VAT), especially when the (ad) market is down."
The Finance Ministry has argued, however, that the 7% VAT on most newspapers and magazines was a way of introducing a transition period. Under the new law, a 0% VAT was permissible only on books and some specialized magazines until 2003, said Deputy Finance Minister Jan Rudowski. According to the Finance Ministry, incorporating local press into that group was difficult due to problems with the exact definition of "local publications."
"The Finance Ministry was counting on an increase in budget revenue, but this was an illusion because companies with financial problems will stop paying taxes and now they will have to lay off people, too," Wolkowiak said.
Wolkowiak said that newspaper and magazine sales are down by an average of 6% compared to last year and that some publications' sales have sunk by as much as 40%. "Of course we can't prove that the introduction of VAT was the only reason for the slowdown, but it was certainly one of the factors," he said. "At the same time, VAT was the only reason for the price hikes of papers." He added that members of the IWP have met repeatedly with MPs this year to explain the situation. "If local publishers lose their financial liquidity, they will lose their independence while trying to find additional sources of financing," he said. "We haven't heard about any papers being closed down, but I know that some publishers are already laying people off."
However, according to AWS' Jackowski, MPs would need two weeks to decide on the amendment's future and whether to scrap it altogether. "There might be some wrangling, though, because I heard the SLD (Democratic Left Alliance) wants a 3% rate," he said.
When the Senate voted on the VAT bill last year, SLD senators proposed keeping the 0% rate for all magazines and newspapers. This year they are more cautious. "There are MPs who are in favor of introducing a 3% rate," said Andrzej Urbanczyk, an SLD MP and deputy chairman of the Sejm's Culture and Media Committee. "Personally, I'd like to have a 0% rate until we're in the EU. It's not that we should act in favor of a specific sector of the market (publishers). Rather, I'm taking into account a dramatic drop in readership. But it will be difficult to push through a 0% rate due to the hole in the state budget, though." SLD's official position on the issue should be announced by this Tuesday, he added.
Leski of Gazeta Radomszczanska was unhappy with the SLD's proposed 3% VAT rate. "It's like an almost-fresh egg, it won't do us any good," Leski said. "If the Sejm keeps the 7% VAT rate, we will keep pretending that we don't know we are doomed to financial disaster. We may try to raise the prices of papers again or raise advertising prices."
