The possibility of a hike in value-added tax (VAT) on books is causing concerns for publishers in the Czech Republic. Currently, the VAT rate on books is ten percent, with some in the industry previously lobbying for complete exemption. However, as part of a stabilization package aimed at helping the country’s budget, the Ministry of Finance is now considering increasing the rate to 14 percent. This would be among the highest rates in Europe.
Frantisek Mala, the CEO of the Euromedia Group, which Rockaway owns, said that the proposal to raise the tax had come as a surprise and warned that it could be “devastating” for some market players. Mala explained that the Czech book market operates on shallow margins and that sales depend on the number of books sold, which is related to their price. The cost of textbooks is rising, with prices for book production, paper, and distribution increasing and impacting retailers gradually. While book prices have increased by only five to seven percent, the costs for publishers and retailers have risen much more.
The situation is compounded by falling book sales in the country, with Czechs spending more on digital content. In 2021, Czechs paid over CZK 8bn ($370m) on books, but interest in traditional literature has declined recently. According to Mala, the number of books sold is dropping, while publishers and retailers have to sell them at a higher price due to the increasing cost of production.
Moreover, the Czech book market has been hit hard by the Covid-19 pandemic. Despite a boom in reading at the beginning of the outbreak, with some predicting that the virus could lead to a new age of bibliophilia, it later became apparent that the pandemic would hurt book sales. In 2020, the overall value of the Czech book market fell by around ten percent, with the pandemic impacting both sales and distribution. The move to increase VAT on books could be another hit to the industry, which is already struggling to stay afloat.
It remains to be seen whether the Ministry of Finance will proceed with the proposed VAT hike. However, if it does, it could exacerbate the current difficulties faced by Czech publishers and retailers. While the Czech Republic is not alone in levying VAT on books, with rates ranging from zero to 25 percent across Europe, the industry is concerned that the move could further erode the country’s book culture and have long-term effects on the market.