The Czech publishing industry is facing uncertainty and concern over the potential increase in value-added tax (VAT) on books. Currently, books are subject to a VAT rate of ten percent, with some industry stakeholders advocating for complete exemption. However, as part of a stabilization package to address the country’s budgetary challenges, the Ministry of Finance is contemplating raising the VAT rate to 14 percent, which would place it among the highest in Europe.

The proposal to raise the tax has caught publishers off guard, prompting fears that it could have devastating consequences for market players. Frantisek Mala, CEO of the Euromedia Group, voiced concern, highlighting the fragile margins on which the Czech book market operates. Sales volume is closely tied to book prices, and with rising costs of production, paper, and distribution, the industry is already facing challenges. While book prices have seen modest increases of five to seven percent, publishers and retailers are grappling with much higher cost hikes.

Adding to the industry’s woes is the declining interest in traditional literature among Czech readers, who are increasingly allocating more of their spending to digital content. Despite Czechs spending over CZK 8 billion ($370 million) on books in 2021, the number of books sold has been on a downward trajectory. Publishers and retailers find themselves in a difficult position, having to sell books at higher prices due to increased production costs while grappling with falling demand.

The impact of the COVID-19 pandemic has further exacerbated the challenges faced by the Czech book market. Despite an initial surge in reading during the early stages of the outbreak, the pandemic’s long-term effects on book sales have been detrimental. In 2020, the overall value of the Czech book market declined by approximately ten percent, as sales and distribution were significantly impacted. The proposed VAT hike on books could deal another blow to an industry already struggling to recover.

The Ministry of Finance’s final decision on the VAT increase is yet to be determined. However, if implemented, it has the potential to intensify the difficulties faced by Czech publishers and retailers. While the Czech Republic is not alone in imposing VAT on books, with rates across Europe ranging from zero to 25 percent, there are concerns that such a move could further erode the country’s book culture and have long-term repercussions on the market. Stakeholders in the industry hope for a solution that supports the sustainability of the publishing sector while fostering a reading culture among Czech citizens.

Article by Prague Forum