Estonia reviewing VAT rates on tickets

By Martin Aadamsoo

    The Estonian government is reviewing the issue of VAT rates on tickets to cultural events following a high court ruling that found the current reduced 5% rate unconstitutional. The lower rate has been in effect for years on tickets sold by organisations with budgets at least 10% financed by public sources as a way to support "high" culture.

    The government's free-market Reform Party is now pushing for a uniform 18% VAT rate for all tickets. That would mean a 13% tax rise for almost all state and municipal theatres as well as classical music concerts. In return, the party promises to raise subsidies to culture-a pledge many view with deep suspicion.

    To justify its position, the Reform Party claims the reduced rate has been misused by commercial concert producers. But opponents point out there is no legal definition of "high" and "popular" culture in any case.

    The three options under debate are to raise the VAT on all tickets to 18%, which will likely lead to price hikes for tickets; to retain the 5% rate for state and municipal cultural institutions; and to lower the rate for all to 5%. The last option may significantly influence the film distribution business in Estonia, currently taxed at 18%. However, the issue is unlikely to be resolved soon due to major disagreements between the government's coalition parties.