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The Ark runs tax gauntlet with music magazine

The Ark runs tax gauntlet with music magazine

Published: 28 May 2010 15:59 GMT+02:00
Updated: 28 May 2010 15:59 GMT+02:00

Swedish glam band The Ark's novel approach to combating music industry monetary woes by releasing its new album as a magazine freebie could have fallen foul of tax agency regulations and ultimately prove costly for the band.

Kerstin Alvesson at the Swedish Tax Agency (Skatteverket) told The Local on Friday that as an investigation has not yet been opened into the tax case, it was only possible to talk in general terms about sales tax rules.

“The 6 percent sales tax only applies to magazines where the accompanying product does not hold any value. Like kids magazines where you get a toy when you buy the magazine. The price is still the same because the toy has no value,” Kerstin Alvesson explained to The Local.

The tax agency was on Friday unable to comment on whether an investigation would be launched into the innovative tax trick by The Ark who were able to circumvent the higher 25 percent rate levied on music, and pay the 6 percent rate levied on books and magazines instead.

The Local reported at the end of April of the plan by the glam rockers to release their new album entitled In Full Regalia together with a 100 page magazine featuring articles spanning the 20-year history of the band as well as lyrics to the songs.

The magazine went on sale at a retail price of 99 kronor ($12) and it is the value of the magazine relative to the value of the CD that would be the factor considered when determining sales tax levies.

Sales tax laws introduced in 2002 state that magazines with accompanying products, such as books, movies or CD’s, where the product has a value, do not fall under the 6 percent sales tax bracket. Instead there should be an increase in price and they should have a 25 percent sales tax meaning that the band in this case may become liable to pay the difference in price and a tax surcharge.

"Any investigation would have to see whether or not the CD has a supplementary value to the magazine and then should have raise the value. In this case it was not a small flyer, the magazine was 100 pages long, so that would be taken into account," Alvesson explained.

Alvesson furthermore added that there are additional clauses in the law that could exempt you from having to pay the additional charges with the law allowing for "special circumstances", such as a first time declaration.

Kerstin Alvesson underlined that she does not want to speculate about the individual case concerning The Ark and their magazine.

“I can’t say that there will be an investigation or what a possible outcome of one would be,” she said.

While the tax break was a cited as a motivating factor for the band's marketing decision, it was not the only one.

"There are around 80 specialized record outlets and a lot of towns don't have a record store any more. Instead, we'll now have 600 sales outlets, so on Monday April 26th hardly anyone will be more than 500 metres from an Ark CD," the band's manager Jon Gray told the Svenska Dagbladet daily at the time.

The innovative promotion idea seems to have paid off with album selling gold (more than 20,000 albums) within only a week of going on sale. The album reached as high as second place on the Swedish top chart, Sverigetopplistan.

The Ark has enjoyed enormous popularity in Sweden over the past decade when all four of its albums topped the Swedish charts.

Lee Martin

Paul Rapacioli (paul.rapacioli@thelocal.com)

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Your comments about this article

20:08 May 28, 2010 by Wertyx
Bottom line: taxes, taxes, taxes and more taxes.

Why are books and magazines taxed 6% while music is taxed 25%?

Why do I pay taxes on my salary, and then I pay some more taxes when I use that money that was already taxed?

Go The Ark! I don't care much about their music but I appreciate the effort to find original ways to market and distribute it.
09:57 May 29, 2010 by Nemesis
In plain language, a few kids who are not part of the in crowd in Stockholm stuck there heads above the parapet and now the begrudgers and malcontents have to do everything they can, to stop them being a sucess.

The reality is, what the kids in the Ark did was a marketing ploy. The Ark should be paid back all taxes they have paid on this issue as it was an expense for marketing there band.

I wish the guys from the Ark every sucess and hope they continue the Swedish tradition of Swedish music punching very far above its weight.
18:09 May 29, 2010 by Puffin
@ Nemesis

Now I admit that it was creative but I'm not sure the Ark can be called *kids* - it's hardly like this is a new group of youngsters just starting out is it?

These guys are one of Sweden's most well known groups and have played together for almost 20 years (they are all in their mid 30s)

This was bound to attract attention as the Ark has had a whole string of number one hits and were even at the Eurovision song contest in 2007
22:13 May 29, 2010 by Tusker
Special poseur tax required for this mob, me thinks!
03:02 June 1, 2010 by Da Goat
Seeing as the album can and will be ripped and moved digitally

then the album is in fact worthless and the ARK have found the ultimate solution really sell a magazine with a free cd (worth 5 crowns) and pay 6% tax only .

the ARK are genius's they have realized that music cd's are not worth much really so they are selling the music only in the form of a magazine.

next step sell the music as a zip file as a computer file is maybe not taxed at all then the purchaser can make their own music files (ie it is not music until after purchase)
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