By Jarosław Adamowksi | @JaroslawAdamows
Draga: ‘Poor Profitability’In a disappointment to the Polish book business, the country’s ministry of finance has announced that it will not support a reduced zero-percent value-added tax rate (VAT) rate on books, ebooks, and news media sales because of the ongoing economic impact of the war in Ukraine and the country’s surging inflation.
Poland’s VAT rates currently are set at 5 percent for books, ebooks, and local and regional press outlets, and at 8 percent for national newspapers and magazines.
As is happening in many international markets, Poland is struggling against rapidly rising inflation running at levels unseen in the country for some 25 years. For December 2022, the state-run statistics agency reported an inflation rate of 16.6 percent—down from a reported 17.5 percent in November and below some economists’ forecasts of 16.6 percent. Specialists warn of higher inflation rates ahead in the new year.
For 2022 overall, the nation’s inflation rate stood at 14.4 percent, the highest level since 1997, according to data from the agency.
Amid rapidly rising costs of paper and printing, Poland’s publishers and booksellers had hoped the government would support the sector by lowering the VAT rates which currently are set at 5 percent for books, ebooks, and local and regional press outlets, and at 8 percent for national newspapers and magazines.
Despite calls for these rates to be cut, the industry news medium Press is reporting that the ministry has sent a statement to the associations of book publishers and news organizations, saying that the ministry has ruled out lower VAT rates on grounds that books and news are not among “basic needs for citizens.”
The president of the news publishers’ association, Marek Frąckowiak, reportedly has asked how the government can afford subsidies for video-game producers but not for a lowered VAT rate for books and news products. “And this means the loss of jobs for employees of editorial offices and publishing houses,” he says, as pressure on the book and news industry grows.
In its commentary to the associations, the ministry says, “Taking into consideration the extraordinary situation related to the armed conflict in Ukraine and the high inflation rate, the highest priority is currently attributed to activities aimed at ensuring the possibility to cover the basic needs of citizens and entrepreneurs.”
Sonia Draga, the founding publisher of Sonia Draga Publishing Group and president of the Polish Chamber of Books, is quoted in the Press article, saying that the government “has once again marginalized the problems of the publishing industry.
“We hoped that the industry would be able to compensate for the difficult situation caused by the increase in operating costs and paper prices,” she’s quoted saying, “by lowering the VAT rate. Unfortunately, once again, the appeals of our environment remain unheeded by the authorities.
“It’s hard to come to terms with this at a time when we should do everything to improve readership and the poor profitability of our industry, because the two are inextricably linked.”
Małaczyński: ‘Higher Costs’
The country’s publishing and bookselling industry representatives point to the examples of other European Union member-states which, despite the looming economic crisis, have decided to maintain their zero-percent VAT rates on books.
Mikołaj Małaczyński, the co-founding CEO of the Poznań-based ebook and audiobook subscription service Legimi, tells Publishing Perspectives that many industry representatives feel disappointed by the recent turn of events.
“The reduction of the VAT rate to zero percent was expected by the industry, “he says, “and it was designed to compensate for the abrupt increase in book production costs triggered by higher costs of paper, logistics, and publishing rights [to foreign-language titles] which are settled in foreign currencies, mainly in the US dollar.”
A recently published report by the international consultancy Bain & Company, which made an online survey of Polish consumers in the fourth quarter of 2022, shows that Poles plan to cut their expenses in 2023. Consumers responding say they plan to curb their spending on entertainment, in particular streaming services, but not on books, which many Poles treat as a less expensive alternative to other forms of entertainment, according to Małaczyński.
“The study itself shows that ebooks and audiobooks, which systematically attract a growing group of recipients, enjoy enduring popularity [among Polish readers]. At Legimi,” he says, “we also don’t see a noticeable decrease in the demand for our offer.”
Perhaps surprisingly, the rising prices of print books are also impacting the prices of ebooks and audiobooks in the Polish market, he says.
“At Legimi in late 2022, we increased the prices of subscriptions for our customers because of the increasing purchase prices of ebook and audiobook licenses from publishers,” Małaczyński says. “Those are determined on the basis of paper costs, which increased by more than 10 percent in 2022.
“Should the VAT rate on books be reduced to zero percent, we could probably limit the scope of these increases.”
A programming note: Sonia Draga–president of the Polish Book Chamber, vice-president of the Federation of European Publishers and founder of the eponymous Sonia Draga Publishing Group in Katowice–joins Publishing Perspectives on Friday (January 27) in a special round table on generational change in the book business and bookselling, a part of the Scuola per Librai Umberto e Elisabetta Mauri, the “school of booksellers.” You can register now to see the live stream of the event, free of charge, here.
Draga will provide an interesting and unique insight into an effect on the Polish book publishing market relative to Vladimir Putin’s unprovoked assault on Ukraine.
Also speaking on that round table at 11 a.m. CET (10 a.m. GMT) on January 27:
- Michael Busch, Thalia
- James Daunt, Waterstones, Daunt Publishing, and Barnes & Noble
- Sonia Draga, Sonia Draga Publishing House and Federation of European Publishers
- Gilles Haéri, Editions Albin Michel
- Stefano Mauri, Messaggerie Italiane and Gruppo Editoriale Mauri Spagnol
- Madeline McIntosh, Penguin Random House USA
Porter Anderson contributed to this story. More from Publishing Perspectives on the Polish book market is here and more on industry statistics is here. More on Europe is here, and more on taxation is here.