Spanish Industry Reacts to Sales Tax Hike

Increased tax will force movie theaters, live concerts and music recordings to raise prices.

MADRID - Spain's culture industry decried the government's announced sales tax hike as a nail in the coffin of floundering movie theaters and music events, calling it a serious error and predicting it will directly lead to the shuttering of theaters by the end of the year.

"The tax hike is the icing on the cake after piracy and a general drop in attendance," said Borja de Benito of the Spanish Federation of Exhibitors FECE. "It will be very difficult for exhibitors to weather this new initiative."

Friday, the government raised the tax in a weekly cabinet meeting. The new rates see theater admissions' tax grow from 8 percent to 10 percent, while CDs, DVDs, digital books and electronics jump from 18 percent sales tax to 21 percent on each purchase.

"So far this year, theater attendance has dropped 12 percent and starting Monday--just ahead of the summer months--we have to raise prices, making each screen harder to balance," De Benito said. "The rise in tax penalizes and threatens consumption, forcing a rise in prices hard to foot given the present market and generating consumer distrust in the business sector."

The music industry added its voice to the film industry's.

"It could seriously affect contracts that have already been negotiated and signed, since the budgets were created with the present IVA (sales tax) in mind," said a spokesperson for the Association of Live Music Promoters, which said sales figures had dropped 12.3 percent in the past year.

Given that the recorded music segment of the industry has been the worst hit by piracy, the president of Spain's Promusicae Antonio Guisasola said the tax increase was unquestionably a "nail in the coffin" for recorded music.

An average CD which costs between 10 ($12.20) and 12 euros ($14.60), will see its price rise 1.5 ($1.80) to 1.8 euros ($2.20) with the new rates.

The only segment of the culture industry exempt from the hike was printed books--which fall under a special reduced tax of 4 percent--and will stay there. Digital content industry-insiders complained that the 17 percent spread in tax between digital books and their print version was unfair.