High VAT helps CD piracy grow

Until recently, we would see them in public squares and tavernas, where, silently, they would extend a handful of 10 or so CDs. Last summer, roaming CD salespeople even reached the beach. They would hover over straw bathing mats and if they were unoccupied, wait for bathers to return from the sea. The majority were polite and did not push people to buy, but the problem they represent remains. The number of children begging at traffic lights may have diminished as they are replaced by peddlers selling fishing rods, bananas and knick-knacks, but the number of people selling pirate CDs in public spaces is on the rise. The fact that we are unable to enjoy our food without the red-and-white cover of Kokkinou’s latest CD being thrust in our face is a nuisance. But the problem is that CD buyers prefer the pirated product of 6 euros over the legal version of 20 or 25 euros. By general consent, CDs are expensive, especially for those who also have to satisfy their children with each season’s big hits. The issue of CD piracy reached Parliament for the fifth time in a year as did the French proposal to reduce value added tax (VAT), which in Greece stands at 18 percent. A reduction in VAT would mean cheaper CDs, which appears to be something many people are in favor of; not just people buying CDs, but singers, composers, songwriters and recording companies as well. VAT is a burden on every release – on the artists’ rights and the cost of production, which includes recording hours, the artists’ fees as well as technical costs. If a single song on an upmarket album needs to be worked on in the studio for many hours, the cost of recording can reach as high as 4,402 euros. But the recording company also has to make a profit, as do intermediaries, such as record store owners who distribute the product. The price of CDs is more or less the same at all central record stores, but this cannot be said of stores in peripheral areas. In Rafina, some 30 kilometers east of Athens, for example, a double CD may cost as much as 25 euros even though the price of the same product when it left the record company was set at half as much. VAT is imposed at all stages of an album’s production, even on advertising. When a company hopes that a new release will be a big seller, an extensive ad campaign can cost as much as 44,000 or even 150,000 euros. In order to meet the cost of such an expensive production, the record company must, for example, sell as many as 13,000 copies. Easy though this may sound, it is a difficult task, especially if one considers that for an album to reach «gold» status in Greece, it has to have sold 20,000 copies. The fact is that the State makes a huge amount of money through the VAT it imposes on recorded products. The damage piracy does to the product is just as great. Three years ago, recording companies reported net profits of over 67 million euros (for 8,000,000 units sold). This number dropped by 9 million euros last year and is expected to have dropped even further by the end of 2003. A rise in sales is related to a reduction in tax, according to the experts. Earlier this year, the deputy culture minister told Parliament that Greece had accepted the pertinent French initiative. The aim would be to get Greek recorded products on a European Union list that would allow reductions. Only then can cheaper CDs be discussed; and maybe even better productions, music that is not made simply to «score» and «rake in the cash,» but that has real quality and character. Such a move could also help cut the number of pirate CD peddlers, because a buyer would more likely select select a 12-euro original over a 6-euro pirated copy. But as long as the discrepancy in prices continues, the illegal recording business will thrive.