Culture, hospitality sectors fear consequences of planned VAT hike

The cultural and hospitality sectors fear the consequences of the new coalition’s plans to impose the high VAT rate on them. Books, newspapers, performing arts, and museums, for example, currently fall under the low VAT rate of 9 percent. The PVV, VVD, NSC, and BBB want to place them, and the hotel sector, under the 21 percent VAT rate.

The VAT increase will take effect in 2026. The coalition expects it to raise 2.2 billion euros for the treasury. Day recreation, cinemas, and campsites are excluded from the VAT hike.

Sector organization KHN called it “a new blow” for the hospitality sector, referring to increased costs and the after-effects of the coronavirus pandemic, NOS reports. The Association of Dutch Pop Podiums and Festivals worries about their earning capacity and that “going out will soon only be affordable for rich people.”

The Association of Theater and Concert Hall Management called the measure worrying. “Strong stages contribute ideally to the improvement of the business climate desired by the parties,” the association told the broadcaster.

The book industry expects price increases and a decline in sales. And that while “reading skills are already under pressure,” the trade organization CPBN said.

The Dutch Association of Journalists (NVJ) worries about the accessibility and quality of journalism. The new coalition isn’t only increasing the VAT on newspapers and magazines but also cutting the national public broadcasting budget by 100 million euros per year.

According to NOS, the government previously asked two independent agencies to investigate the efficiency of the reduced VAT rate in these sectors. They couldn’t conclusively show that the 9 percent VAT rate on books and culture achieved the intended goals of stimulating the knowledge economy, access to information, and media pluralism. The low VAT rate for museum tickets did likely support the tourism sector, though the researchers could also not say that with certainty.

You don’t have to be an economist to know that higher prices will lead to fewer visitors to museums and theaters, René Goudriaan, a retired economics and culture advisor, told the broadcaster. “This sector has no meat on its bones because cuts have been made in the past and the institutions are still recovering from the lockdowns.” Cultural institutions will, therefore, likely be forced to pass on the VAT hike to visitors or customers, resulting in a price increase of over 10 percent. He expects between 3 and 10 percent fewer books or entrance tickets sold as a result.

Barbara Baarsma, a professor of economics at the University of Amsterdam and a chief economist at PWC, wonders what the new coalition’s goal is with this measure. “Are these cuts, or is it a redistribution argument? Higher incomes use the cultural sector more than lower incomes, and they can afford a more expensive entrance ticket,” she said. “But then you tar all facilities with the same brush, regardless of the target group.”

Baarsma also wonders whether cinemas can be spared under the fair competition rules. “You can argue that cinemas compete with museums and music venues. In that case, not all cultural facilities are treated equally, which they should be.”