Spanish Exhibitors Warn of Rise in Piracy Due to Sales Tax Hike

Warning comes after Spanish government adopts across-the-board sales tax increase and eliminates reduced rate on movie admissions.

MADRID - Less than a week after the Spanish government raised the sales tax on movie theater tickets from eight percent to 21 percent, Spain's exhibitors Tuesday warned of a rise in piracy and appealed to the government to negotiate a solution to not penalize legal content.

"With the government's decision, Spain is the only country in the EU that doesn't have a reduced sales tax on movie theater admissions," FECE said. "The price increase for the legal movie offer--in theaters as well as other windows--will foment piracy, reducing legal consumption and driving down the sales tax collected, opening the possibility that Spain will once again form part of the United States government's place list of piracy."

Spain has seen ticket sales drop 12% in the first half of the year and is notorious for its rampant piracy-- reportedly more than 80 percent of digital content consumed in Spain. The new rate, the highest in the EU, compares to seven percent in Germany and France and 10 percent in Italy and Austria.

Last Friday, the Spanish government approved a general tax hike across the board for all sales tax, but startled the culture industry when it rose movie theater ticket sales tax from a reduced rate of eight percent to 21 percent. Exhibitors had already decried the proposed jump from eight percent to 10 percent, but were shocked by the additional loss of reduced rate status.

"Given present conditions, a strike is not a possibility for protest since the only thing it would do is worsen the situation," Spain's exhibitor federation FECE said in a statement. "So, we appeal for direct talks with the treasury to communicate the consequences of what that change in rate will mean for the exhibition section."

American diplomacy has repeatedly highlighted the piracy issue with Spanish officials and voiced anger at reluctance to decisively act, with a reported letter from U.S. Ambassador Alan Solomont last December leaked to Spanish daily El Pais threatening to put Spain on a U.S. trade blacklist.