Opposition mounts to foreign magazine tax

As the government prepares to close a tax loophole for foreign publications, President Obama is being asked to take up the issue with the PM

February 24th, 2012 4:56 pm| by admin

Danish lawmakers are set to defy widespread criticism and go ahead with a proposal to close a tax loophole and make magazines printed outside the EU substantially more expensive.

Currently, magazines printed outside the EU are not subject to VAT, leading many Danish publishers to print their magazines in countries such as Norway and Switzerland to keep down costs.

By closing the VAT loophole, it is hoped that the publishers will return to Denmark. But the postal service, Post Danmark, warns that it will have to manually sort all magazines arriving from outside the EU, meaning subscribers will have to pick up their magazines from the post office to pay the VAT – and a 160 kroner fee charged by Post Danmark for having to sort the mail.

The law, which is due to come into effect on April 1, is being attacked on both sides of the Atlantic, including the American embassy in Denmark. It argues that Post Danmark’s levy will contravene the Florence Agreement, signed by both Denmark and the US, which prohibits the placing of levies on educational, scientific and cultural material.

"I can say with certainty that if the law is passed in Denmark it will lead to a levy and we have both commited ourselves not to place customs duties on this sort of material by signing the Florence Agreement,” the US cultural attaché in Denmark, Shawn Waddoup, told Politiken newspaper.

“Many Danes are interested in what is happening in the US so they have chosen to subscribe to American magazines and the law would make it almost impossible to continue to do so.”

According to Politiken, news of the law has even reached the US, where Virginia Congresswoman Shelley Moore Capito has written an open letter to President Barack Obama demanding that he bring up the issue when he meets with PM Helle Thorning-Schmidt later today in Washington.

Criticism of the legislation is also mounting domestically as the Danish union of journalists, Dansk Journalistforbund (DJ), released a statement today arguing that publishers have not had enough time to move their production back to Denmark.

“You can’t just raise the price 25 percent and slap subscribers with as an enormous custom levy,” DJ chairman Mogens Blicher Bjerregård wrote in a statement. “It will hit publishers hard and lead to closures and job losses as a result.”

Bjerregård added that Denmark needed to be have an international outlook, which means being able to subscribe to magazine from across the world.

Dansk Specialmedier, the interest group for small-circulation publications, also warned the government last November of the impact the law would have on the domestic publishing industry. It encouraged the government to postpone the implementation of the law by a year to give publishers time to change to domestic printers.

The government seems intent on proceeding with the legislation, however, after both the tax and transport minsters supported it in front of MPs at a parliamentary hearing this week.

The transport minister, Henrik Dam Kristensen, argued that publishers would adapt to the new rules by shipping foreign-printed magazines in bulk as a way to duck Post Danmark’s processing levy.

But according to Politiken, six million out of the nine million foreign magazines entering Denmark each year are shipped in bulk. The remainder are direct subscriptions from niche magazines, which would face the levy.

Furthermore, Post Danmark has estimated that sorting the foreign-printed magazines would require an additional 500 employees, at a cost of 237 million kroner a year. The Tax Ministry only expects to earn an extra 60 million kroner annually from the extra VAT income.

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