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The Impact of GCT on Printed Matter

The Impact of GCT on Printed Matter. Discussion between Book Industry Association of Jamaica/Ministry of Finance June 1, 2012. The BIAJ and the Jamaican Book Industry. Trade association representing authors, publishers, distributors and retailers Founded in 1989

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The Impact of GCT on Printed Matter

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  1. The Impact of GCT on Printed Matter Discussion between Book Industry Association of Jamaica/Ministry of Finance June 1, 2012

  2. The BIAJ and the Jamaican Book Industry • Trade association representing authors, publishers, distributors and retailers • Founded in 1989 • Membership accounts for >90% of industry revenue • Publishers • 20+ publishers • 150+ self-publishers per year • Distributors • 3-5 academic distributors • Represent local and intl titles • 1 leisure book distributor • Retailers • ~2,000 retail outlets (pharmacies, supermarkets, specialty stores) • ~200 bookstores • <10 leisure bookstores

  3. History of GCT on Printed Matter 2005 GCT Exempt (0%*) 2003 2005 2009 2009 2012 GCT Taxable (16.5%) 1991 GCT zero rated (0%) *Businesses cannot recover GCT Input Tax

  4. Rationale for Repeal of GCT • Limited tax gains • Revenue loss and for booksellers: store closings and job loss • Price increases for parents; more unprepared students • Damage to local publishing industry • Additional logistical challenges for schools/MoE and bookstores

  5. Tax Exempt Items Now Subject to GCT Books, Newspapers and Education 10.     Printed matter, articles and materials classified under Tariff Heading 49.01 to 49.05 such as: (a) brochures, pamphlets and leaflets for religious purposes and books and booklets (b)  newspapers, journals and periodicals, whether illustrated or not (c)  children’s picture books and painting books (d)  maps and hydrographic charts and similar charts of all kinds, Atlases, wall maps and topographical plans, printed globes

  6. Limited Tax Gains: 5% of Sales • Textbooks are 85% of the market • Textbooks + Academic + Religious = 95% • 70% of textbooks are purchased by the govt (MoE) for use in the National Textbook Loan Scheme • Remaining textbooks are purchased by parents • Leisure book sector = 5% • But: many books with educational value counted in leisure sector (e.g. EC books)

  7. Implications for Parents, Students • Rising prices • Decreased access to books -- JSCL 2008: 35% of students don’t have all their textbooks; 5% have none • CAC indicates that price is the major factor in book purchases • Booklists already expensive. Examples: • Grade 6 prep school: $35,000 • Fifth form high school: $45,000 • First year UWI: $87,000

  8. Projected Price Increases Most textbooks sold in Jamaica are imported and therefore impacted by changes in the FX rate FOREIGN EXCHANGE RATE (10 day moving average rate) J$:US$1 APRIL 30, 2012 87.37 APRIL 30, 2011 85.80 DEVALUATION $1.57 % CHANGE 2%

  9. Impact on Prices (with GCT) The following factors will contribute to the price increase of a book purchased overseas that sold for $100 in 2011:

  10. MAINCONTRIBUTORS Devaluation 2% Overseas Suppliers Increase 5% Price Increase in Books GCT @ 16.5% 18% Total Price Increase 2012 25% PRICE INCREASE IN 2011 WAS 5% (CAC)

  11. Book Price Increases vs Inflation Rates (2007-2012est.)

  12. Implications for Schools/MoE Proposal to sell books through MoE/School System would create • Multiple challenges in current distribution of books through NTLS • Schools do not have the storage, bursary, inventory management capabilities and security • Booklists vary at the school level; schools would have to order in cost-inefficient quantities • Logistical nightmare for MoE to manage • ZERO REVENUE GAIN – INDUSTRY DISRUPTION – EDUCATIONAL CHALLENGES

  13. What’s in the 5%? Children’s Books Magazines Novels Miscellaneous Books Logistical Concerns • Some categories difficult to distinguish: Early Childhood, English, Literature, Sociology, History, Economics,, Civics, Communication Studies Development Concerns • 50% of children under 9 have no books other than a textbook in the home • 25% of children under 9 are not being read to • 35% of Jamaicans over 15 are functionally illiterate • MoE specifically encouraging leisure reading especially at early childhood level (storybooks) and civics)

  14. Revenue Implications for Booksellers GCT on Leisure Books • Price sensitivity highest in the leisure sector: price increase will result in immediate sales losses; particularly in children’s books • Sales in leisure sector already low: “bestsellers” move ~1,000 units per year • Sales in this sector already shifting to online sales and e-books. But only for wealthier Jamaicans • Device penetration still low : tablets and e-readers <4%; computers <20%,

  15. Implications for Local Publishers Removal of waiver of GCT on printing + GCT at sale will destroy local publishing • Accelerated shift in overseas printing • Locally printed books will remain disproportionately expensive in comparison to international titles, resulting in lower sales • Local publishers already at competitive disadvantage because of print runs: 10,000 to 300,000 (US) vs 200 to 5,000 (JA) • Poor people affected most; don’t have access to online purchasing and ebook options • Higher prices will increase illegal photocopying, resulting in revenue losss

  16. Additional Challenges • Taxes applied with no warning; books have already been ordered • Logistical and software challenges: requires revision of cash register systems • Maintaining two lists (leisure/text) difficult to manage • 4,000+ academic institutions each with its own booklist • MoE advocating for increased publishing of leisure title; specific requests for titles in early childhood and civics

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