Fiscal and Economic Aspects of Book Consumption in the European Union

Abstract

One of the available and yet controversial tools in cultural policy at the national level is the reduction of VAT rates for cultural goods and services. We document the standard and reduced VAT rates in EU-28 countries in the period from 1993 to 2013 and explore the underlying determinants. We further introduce a simple theoretical framework to explain how reduced fiscal rates are expected to decrease prices and increase quantities of the consumed cultural goods and services. We then estimate quantitatively that a decrease in the VAT rate for books by one percentage point is associated with an economically significant drop in the price by 2.6%. Finally, we show the positive effect of a fiscal rate reduction on the book expenditure, where a one percentage point decrease in the VAT rate for books leads to an increase in expenditure by 2.7%.

Digitization of heritage collections as indicator of innovation

“…3. On the issue of funding heritage institutions, and cultural consumption more in general, refer to Borowiecki and Navarrete (2015). 4.…”

The European VAT Oxymoron: A pragmatic solution for welfare, especially in times of crisis?

“…There, the decrease of the applicable VAT rate from 19% to just 10% was not enough to drive demand, possibly because of the low levels of overall household income. This contradicts a cross-country EU study, which found that, usually, low VAT rates on books equal lower prices and drive consumption of these goods up, reaffirming the rationale behind their inclusion in the reduced rates' regime (Borowiecki and Navarrete, 2015).…”

“…According to de la 2015). Setting reduced rates on these correlates with the theory that the market cannot internalise their externalities, thus impeding their effective circulation and allocation (Borowiecki and Navarrete, 2015). This is precisely the reason why states intervene through their fiscal policies, including VAT planning, to try and tackle such complications.…”

“…Regarding cultural events, in the Netherlands the VAT on theatre tickets increased by 13% in 2011, culminating in higher prices, and, subsequently in a sales drop, although the latter could be attributed to the general recession climate of the early 2010s (Borowiecki and Navarrete, 2015); the rate reverted back to 6% the following year. In a crisis-hit state, Spain, a VAT hike from 8 to 21% took place in 2013, with spectators numbers falling and jobs in the industry lost, showcasing the negative effects of fiscal austerity and the need for VAT differentiation therein.…”

“…Of course this is the case only if reduced VAT rates are passed on to consumers, something that does not always happen (Borowiecki and Navarrete, 2015).…”