1. VAT on reading: Latvian experience from 2009 Renate Punka Head, Council of Literature and Culture, Latvian Ministry of Culture

2. Agenda Brief history Immediate effect Delayed effects Does VAT make a difference? Lessons learned Latvian publishing industry in 2010

3. Brief history November 29, 2008 December 12, 2008 December 18, 2009 – July 23, 2009 August 1, 2009 Idea of raising VAT first announced publicly by Minister of Finance Parliament vote about VAT (5% goes up to 21%) Lobbying for reduced VAT Reduced rate (10%) for books become effective for all original works

4. Immediate effect Frozen projects, laid-off employees, cancelled contracts Sharp decrease of sales and new orders Desparate activities of publishers and booksellers to create cash-flow Debts to tax institutions

5. Delayed effects Statistics of 2009: Number of new titles per annum – lowest in the last decade (2244, decrease from 2008 – 23%) Total print-run of new titles – lowest since 1992 (3,5 mln copies, decrease from 2008 – 33%) Distorted proportion of “ healthy” sales vs SALES Decrease of average price per copy

6. Does VAT make a difference? Jan–Jul’09Aug-Dec’09Average in 2009 Decrease in sales (publ) -43%-19%-32% Decrease in sales (booksellers) -48% (some: 60-70%) -22%-36% Average RRP per copy in 2008 LVL 7,26 Average RRP per copy 2009 LVL 5,29

7. Lessons learned Lack of proper statistics – obstacle to prove the miscalculations of state officials Books have no price elasticity (RRP vs purchase value) Reduced VAT – the only real instrument to keep industry competitive (esp. in times of downturn)

8. Latvian publishing industry in 2010 A year of reading and More than one life initiative (www.vairaknekavienadzive.lv)www.vairaknekavienadzive.lv Reading promotion campaign Attention! Boys Reading! Libraries as the substitute for regular book buying: pros and cons New lobbying campaign for low VAT

9. For more information, please, contact: Renate Punka: renate.punka@jr.lvrenate.punka@jr.lv Latvian Publishers Association: lga@gramatizdeveji.lv lga@gramatizdeveji.lv

10. THANK YOU for attention!