Thursday November 1, 2012
By Steve Redmond
I've just been preparing the ERA submission to the DCMS Select Committee and had cause to look up the figures for just how big music sales in the UK were at their height. It was 2001 and the figure then was £2,111m. In 2011 in contrast the market was down to just £1,066m, just about half the figure a decade earlier.
It reminded me of an interview many moons ago with the redoubtable then-Chairman of Sony Music in the UK, Paul Russell. Russell was never short of opinions and many of his views on retailers weren't printable, but on this occasion I was quizzing him on an idea which still comes up from time to time: should music be zero-rated for VAT, just like books?
"Bollocks", he said , or it might have been "Bullshit"- it's difficult to remember, but the next bit I do recall: "When the music industry goes in to Government asking for help on copyright, I don't want to be the industry that generates nothing in tax for them. I want us to to be generating hundreds of millions for them. It's the
only way they take you seriously."
Which set me to thinking: just how serious a tax generator is the music industry these days, compared with what it was? In 2001, the VAT rate was 17.5% which on retail revenues of £2,111m generated for the Exchequer something like £314m.
Fast forward to 2011 and the market has shrunk but VAT has gone up to 20%. By my reckoning, if everyone paid UK VAT the total would be around £213m.
It's higher than it was a year ago. Low Value Consignment Relief, which enabled internet retailers to ship VAT-free from the Channel Islands, clearly depressed VAT takings for a few years, but that loophole has now been plugged. Still, despite that increase in the VAT rate to 20%, music's value to the Chancellor is sharply down on a decade ago.
The plain-speaking Russell might well have pointed out that if the Government had pulled its finger out and done something about piracy a bit earlier maybe they would be reaping the benefits.
The bad news is that if his original thesis is correct, the more music's VAT receipts do decline, the less likely they are to pay attention at all.