VAT will be the day

Press, 12 July 1979, Page 14

VAT will be the day

Drastic VAT (valueadded tax) increases announced in the Budget by the British Prime Minister (Mrs Margaret Thatcher) have forced many albums past £5 (SNZI2) and singles above £1 (SNZ2.2O).

The New Zealand equivalent for albums is $8.99 and singles $1.99. The increases, virtually doubling the tax from 8 to 15 per cent — confirmed the record industry’s worst fears. As well as the effect it will have on the recordbuyer’s pocket, long-term damage could be furtherreaching, now that the psychological £1 barrier

has been breached on singles.

In order to avoid crossing the £1 barrier, some companies have attempted to absorb the increase as far as possible by reducing the dealer price. Arista have pegged their most expensive albums at £5 and singles at £l. Even so, it will mean a serious re-think of marketing policy, says Arista marketing director, Denis Knowles, especially with singles picture bags, coloured vinyl and the like. Richard Robinson, assistant managing-director at W.E.A., says that theoretically the increased VAT costs should be offset by savings in income tax,

though he didn’t think that one would quite balance the other.

Record companies could be hit hardest by increased import sales, as the increase in Government VAT narrows the price between English and imported albums.

Albums brought in from abroad are subject to VAT, but the average price of an American import at Virgin Record Stores will be £5.60 (SNZ 12.32), which means they cost virtually lOp more than the most expensive English albums. This is most likely to harm early sales, in cases where importers bring in records not yet released in Britain.