Effectiveness of the special VAT-rate for culture and the media

In the Netherlands, a lower VAT-rate (6% in stead of 19%) applies for cultural and media products, such as museums, newspapers and books. This policy is supposed to stimulate the spread of culture and general knowledge among Dutch citizens, and to support cultural and media enterprises.

The ministry of Education, Culture, and Science asked APE to evaluate whether the special VAT-rate is the most effective policy instrument to reach these goals.

The findings suggest that the lower VAT-rate is successful in helping to spread culture and general knowledge, but that it is difficult to isolate its effect from coinciding policy instruments. However, the lower VAT-rate is the best-performing policy instrument when minimizing red tape is considered.

The total loss of tax amounted to 415 million euros in 2004. Most of these tax losses were accounted for by the book and newspaper business.

Because the lower VAT-rate does not apply to new (interactive) media, such as digital magazines, the current policy is in fact distorting the market for media products. APE therefore advises to broaden the policy to include both new and traditional media.

The results of this study were presented to the Dutch parliament on 6 March 2009.