27/11/2012 - Media consultant Ignasi Guardans on the Cinema Communication, European tax harmonization and the VAT increase in Spain

Media consultant Ignasi Guardans on the Cinema Communication, European tax harmonization and the VAT increase in Spain The European film industry is eagerly waiting the new Cinema Communication, which is supposed to be presented in December in Brussels. The Communication is essential because, without this framework, every fund or scheme would need to be approved by the Commission. But not all issues can be solved through the Cinema Communication as Ignasi Guardans, CEO of CUMEDIAE in Brussels, explains. The tax harmonization in Europe requires different guidelines.

Cineuropa: Is it still a key issue for the European Commission to stop the tax competition with the new Cinema Communication?
Ignasi Guardans: The Commission is against is the tax 'beauty contest' among member states that have the best schemes to attract investments in cinema. I understand the Commission‘s point that it might distort the market, but that is the consequence of not having a real tax harmonization in Europe. It is a bit silly to try to change that through the Cinema Communication instead of tackling the difference on tax schemes on a much higher level. We could go for a stronger harmonized tax system. As long as taxes remain a purely national thing, we still have a tax competition.

How can that be changed?
On a higher level, there is the debate that could be started with VAT and company taxes. We could have a European scheme, European models and certain incentives that could be used but fixed. That is part of the whole debate on reinforcing Europe as a real economic union and not just a monetary union. That would include the tax element, which is on the discussion table now in the middle of the crisis. This is a much larger debate on some sort of tax union.

Would that protect us from tax increases like the VAT for the cinemas in Spain?
The VAT increase from 8 to 21 per cent that has happened in Spain for theatres and cultural activities will bring huge harm to many companies, exhibitors and people in the cultural industry. It is unfair to jump from 8 to 21 per cent in VAT. It would be completely different if we had a harmonized VAT tax in Europe - the continent should make it clear to member states that culture is not just an entertainment service and should push member states to keep smaller tax amounts for culture.
The Spanish government is saying that is a temporary measure but it will be too late when the crisis is over. You cannot kill a sick person during a visitation and turn this patient back to life again later on.

What kind of impact has the Cinema Communication on taxes had?
The Cinema Communication fixes criteria under which subsidies will be legal or not but in its current state it can‘t say what the VAT rate must be in one member state or another. That is up to the council of ministers of culture. It would be possible to fix certain guidelines even without harmonizing VAT, so that culture could not be attacked through VAT tax. It is not the purpose of VAT to kill the culture industry. Even financially it makes no sense, because there is no tax coming back if you ruin companies.

Is there a chance that the Council of Ministers will come up with guidelines?
It would be possible but in the current political circumstances everybody is looking for something else. Unfortunately, the priorities of culture are not exactly the most important priorities on the table of the council of ministers. That is the reality. It is on nobody's agenda now. The Commission of Culture could make this political pressure and take this leadership. The Commission president could do that – but that is not happening at the moment.

Is there an awareness of this issue in Europe?
The Spanish cultural sector could raise its voice and make clear to the rest of Europe that they are being subjected to attack. They are treated as entertainment. In fact, there was an internal memorandum from the tax ministry, which was revealed und published on Twitter. It was an internal paper before this tax was raised from 8 to 21 per cent, treating the whole arts, performances and cinema as just entertainment. If it is just entertainment than it deserves 21 per cent but culture deserves a specific treatment.