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Gov't jacks VAT on press outlets

The government announced its plans to crack the whip on the independent press by jacking up the value-added tax for newspapers by 17 percent. This has prompted a warning from the Slovak publishers' association that the move will destroy the plurality of opinion in the Slovak media.
The bill, approved by the government on October 21, proposes that the rate of tax on publications which devote more than 10 percent of content to advertising or erotic and pornographic material, would be increased from 6 percent to 23 percent.
Most publishers fiercely opposed the move, saying that even a small increase in price would suffice to drive their less wealthy readers away. "It is an attack on the plurality of the press, because insolvent readers, especially pensioners, who form the largest group of subscribers, will simply be forced to give up their daily paper for economic reasons," said Miloš Nemeček, chairman of the Slovak Publishers' Association.

The government announced its plans to crack the whip on the independent press by jacking up the value-added tax for newspapers by 17 percent. This has prompted a warning from the Slovak publishers' association that the move will destroy the plurality of opinion in the Slovak media.

The bill, approved by the government on October 21, proposes that the rate of tax on publications which devote more than 10 percent of content to advertising or erotic and pornographic material, would be increased from 6 percent to 23 percent.

Most publishers fiercely opposed the move, saying that even a small increase in price would suffice to drive their less wealthy readers away. "It is an attack on the plurality of the press, because insolvent readers, especially pensioners, who form the largest group of subscribers, will simply be forced to give up their daily paper for economic reasons," said Miloš Nemeček, chairman of the Slovak Publishers' Association.

"Information sources for poorer people will shrink, [forcing them to] watch state-run television, listen to state radio and read a [government] subsidized press," said Pavol Minárik, chief editor of Pravda, the second largest Slovak independent daily.

According to Nemeček, the 10 percent limit on advertising snuck into the bill during a government session to discuss a bill on a general increase in VAT. Contrary to the original draft, which was submitted by the Finance Ministry and which suggested the increase would affect only publications containing over 50 percent of advertisements, the ministers approved a 10 percent limit, allegedly proposed at the session by Ivan Hudec, the Culture Minister.

Hudec has a long history of being at odds with independent media, which he says "are not friendly towards the ruling coalition." The recent tax dispute definitely has political overtones. Much of the Slovak press is critical of Prime Minister Vladimír Mečiar, whose commitment to democracy is also questioned by western governments.

Mečiar relies largely on state radio and television to get his populist message across. Independent publishers suspect, but cannot prove, that the few newspapers loyal to Mečiar are somehow being subsidized, and that their retail prices would be unaffected by the VAT increase.

Nemeček said the publishers learned about the details of the final draft a week after it had been approved, when they got hold of a list of exceptions to the VAT tax increase. The list included periodicals, but only those with less then 10 percent of advertisement, erotic content and pornography. "None of us would have dreamed of that," Nemeček said. He said that according to the World Association of Newspapers' statistics most countries' VAT on newspapers is zero or less than 10 percent. Only Russian and Bulgarian papers are taxed over 20 percent.

Minárik said that currently, the price of Slovak periodicals covers less than half of their production costs, while the rest is paid for by income from advertising. Publishers expect paper and distribution prices to go up next year. Additional costs will also come from the law regulating salaries, due to higher taxation.

"I predict that total sales of newspapers and magazines will drop by 20 percent," said Alexej Fulmek, publisher of the opposition daily Sme. On October 30th, publishers sent a protest letter to the government and asked it to reconsider the proposal. But the following day, in his regular Friday interview for Slovak radio, Mečiar made it clear that no change can be expected.

"The government doesn't have the bill at its disposal anymore, we have passed it on to parliament," Mečiar said. "I don't think fewer newspapers will be published as a result [of the legislation]. Every publisher knows this law will touch his money, so he shouts that his freedom is in jeopardy. This is not about freedom, this is all about money. Commercial interest is being politicized and turned into a circus," he added.

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