Record sales tax ‘hinders industry’

Press, 29 March 1980, Page 7

Record sales tax ‘hinders industry’

Wellington reporter The ' Government has been asked to abolish immediately or significantly reduce the sales tax on records. The request was based on the grounds that a tax should not be levied on cultural property and that the tax hinders the development of ah industry with significant export and import substitution potential. This is the main recommendation of a 15-page report by the Queen Elizabeth II Arts Council on the development of the recording industry. An investment fund of $300,000 a year for the next five years is also sought from the Government. The council called for a commission to administer the fund, to prove the potential of the industry, and to operate on an investment (rather than grant) basis. With the exception of the Malagasi Republic, no other country compares with New Zealand’s 40 per cent sales tax on records. Israel recently lowered its rate from 40 to 30 per cent. Britain taxes recordings on the value-added tax base rate of 15 per cent. In the United States, the tax varieu between 2 and 6 per cent, while in Australia, the rate of 27.5 per cent continues to attract vocal opposition. The council says the benefits of tax revenue must be offset against: the negative impacts of overtaxing, the loss of company revenue when com-

pames fail to make profits, .the loss of individual taxation resulting from reduced incomes, the loss of skilled personnel because of lack of job opportunities, and the loss of export-earning potential. The recording' industiw is assisted in many countries. Quotas for ' radio broadcast exist in Australia, and in Canada, a 100 per cent investment writeoff has been promised for the local product along with .incentives for retailers •to develop the local market.

Arguments for similar assistance for the New Zealand industry include those used for “infant industry” development. An infant industry policy allows a particular industry a period to become established ultimately to exploit, local resources competitively • with the international market, either; by way of import substitution or export. Recent efforts in the New Zealand industry lead the council to believe the “infant” is at.' a potential take-off . point, with successes by Jon Stevens,' Patricia Larey, • Sharon O’Neill, Street Talk, and The New Zealand Symphony Orchestra. Local sales substitute sales of imported records without impeding them. In the case of Jon Stevens’ two singles on the top of the charts for eight weeks, exchange savings would amount to about $l5OO a week, a top album would save about $lO,OOO to $15,000 a week.

The council believes that some sort of temporary assistance on an infant industry basis would allow for the development of a local product against a less expensive imported one.

Given the chance to reach international standards more easily, New Zealand would have the chance to break into the multi-billion-dollar record market, a market far larger than that for films.

One international hit record . cou’d return to New Zealand millions of dollars in royalties. The Scandinavian group Abba earned more overseas exchange one year than Sweden’s giant car company, Volvo.

Facilities built up could be used by overseas groups taking advantage of New Zealand’s less expensive rates, with consequent promotional and tourism spin offs. ' Fundamentally, such a programme would see the talent of composers and performers., at present wasted? being used to “national benefit,” says the council.. It sees the only way to get the recording industry established is to increase the opportunities for record companies by investment in the same way the film commission helps film makers.

Subsidies should only reward the successful, highest standard product, with the intention being to assist the artist.