One of the available and yet controversial tools in cultural policy at the national level is the reduction of VAT rates for cultural goods and services. We document the standard and reduced VAT rates in EU-28 countries in the period from 1993 to 2013 and explore the underlying determinants. We further introduce a simple theoretical framework to explain how reduced fiscal rates are expected to decrease prices and increase quantities of the consumed cultural goods and services. We then estimate quantitatively that a decrease in the VAT rate for books by one percentage point is associated with an economically significant drop in the price by 2.6%. Finally, we show the positive effect of a fiscal rate reduction on the book expenditure, where a one percentage point decrease in the VAT rate for books leads to an increase in expenditure by 2.7%.

Additional Metadata
Keywords Book markets, Cultural consumption, Cultural policy, Fiscal policy, Value added tax
JEL Efficiency; Optimal Taxation (jel H21), Household (jel H31), Welfare and Poverty: General (jel I30), Tax Law (jel K34), Economics of the Arts and Literature (jel Z11)
Persistent URL dx.doi.org/10.1007/s10824-017-9307-z, hdl.handle.net/1765/102531
Series Creative Industries
Journal Journal of Cultural Economics
Citation
Borowiecki, K.J, & Navarrete, T. (2017). Fiscal and economic aspects of book consumption in the European Union. Journal of Cultural Economics, 1–31. doi:10.1007/s10824-017-9307-z