How to adapt fiscal policies applying to cultural and audio-visual goods in the digital era?
by Sara Petti
- The digital shift has brought many challenges for the cultural and audio-visual industry, but the European legislative and fiscal frameworks do not keep up with it
European fiscal policies applying to cultural and audio-visual goods and services in the digital era have been discussed by the European Coalitions for Cultural Diversity during a conference at the European Parliament on 11th February 2014.
As we know, the digital shift has brought many challenges for the cultural and audio-visual industry, but the European legislative and fiscal frameworks do not keep up with it.
Currently the loss due to fraud evasion schemes and fraud is estimated to be around 1 trillion euros per year, only in the European Union. This phenomenon generates great losses for State welfare, and therefore diminishes, among others, the future funding available for cultural policies. Taxation and culture are more tightly linked than one would think.
Fiscal policies in Europe nowadays are blurred and not clearly defined by a common framework. This leads to tax competitions among Member States and unfair practices. It is for instance the case of Ireland where, for historical reasons, the tax on trading income is set at 12,5%. While its low corporate tax regime has led a giant like Google to base itself there, the same regime has also created competition between Member States and tax loopholes that have eased the burst of a major crisis. “A low tax regime is neither a long-term investment nor interesting for a country”, reminded MEP Pervenche Berès. Additionally, those who are profiting the most of this kind of tax regimes are the digital giants (like Google, Amazon, iTunes) that are not even European, and do not contribute to our countries’ welfare.
We find ourselves in the paradoxical situation of building an economy that does not provide us with what we need to finance our societies and our creators. “We have created a single market of consumption for products sold by the digital giants, which are in a situation of oligopoly, if not monopoly, and are not European”, said Jacques Toubon, French delegate for the taxation of cultural goods and services. “The initial idea was to build a single market to avoid double taxation, the current sad reality is that we have double non-taxation” underlines Walter Zampieri, head of the culture and policy unit, DG EAC at European Commission. This leads to a situation of inequality, where small and medium enterprises (SME) are subject to much higher taxation than the digital giants; SME are not able to compete with them and are therefore doomed to disappear. This is unacceptable and not sustainable over the longer term. European countries must respond firmly and together in order to clarify that one cannot elude fiscal justice just because its business is funded on intangible assets.
Plus, as the European Coalition for Cultural Diversity reminded, the European Union has signed the UNESCO Convention for Cultural Diversity, and this convention should be respected within taxation as well.
A good solution could be a progressive tax harmonisation at the European level, but it is difficult to decide, particularly concerning intangible assets, who should levies the tax: the country of origin or the country of consumption? The European Commission has proposed the taxation to be applied in the country of consumption, even thought no binding decision will be taken during the current legislature due to lack of time. The decision should be voted, by unanimity and implemented, on 1st January 2015. Luxembourg would be given 4 extra-years to adjust.
“One must not forget that digital giants are not the only ones avoiding taxation”, reminded Lorena Boix-Alonso, head of converging media and content unit, DG Connect at European Commission.
The Digital offers incredible means of promotion to European cultural production and that, according to the European Audiovisual Observatory, iTunes is still the VOD provider with more European film titles, for example.
Clearly VAT is not the only problem. In many Member States the same cultural product is not taxed in the same way, depending on whether it is sold on a physical support or not, with striking examples like the UK, where standard format is taxed at 0%, while digital is at 20%. “These kind of policies are equivalent to mortgaging the future”, said Richard Charkin, executive director of Bloomsbury Publishing. “There is no reason why cultural goods distributed or sold via digital devices should not benefit from a lighter tax rate”, asserted Pascal Rogard, president of the French Coalition for Cultural Diversity. And added that this should be done “in the name of technological neutrality as well”.
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