At the request of the Lithuanian Film Centre we conducted an economic analysis of the situation of Lithuanian cinema operators. It is predicted that due to the global COVID-19 pandemic and the quarantine the Lithuanian cinema industry will have lost around EUR 12 million in revenue. A reduced VAT rate would be an effective state aid in this situation.
Suggestion to apply 5-9% VAT rate to reduce consequences of a pandemic
In our analysis of the influence of the COVID-19 pandemic on Lithuanian cinema operators and possible alleviation of the aftermath, we evaluated the expected short-term and long-term consequences of the pandemic, summarized state aid measures applied by the Lithuanian Government and evaluated their effectiveness for cinema operators. We also overviewed taxation practice for cinema operators applied in other countries, analysed forecasts for the cinema operators sector, and offered alternative solutions to reduce COVID-19 related consequences in the cinema operators sector.
One suggested solution in our analysis was to apply a reduced VAT rate of 5-9% to cinema tickets for a particular period. During that period the cinema operators sector would hopefully reach the same level as before the quarantine. The economic justification for a reduced VAT rate is that over several years money saved from VAT could at least partly cover lost revenue.
Says Rolandas Kvietkauskas, the director of the Lithuanian Film Centre: “We hope the research will contribute towards a better understanding of this area of the creative market and will help identify optimal solutions for countering the crisis. The recovery of cinemas is decidedly important for film culture because in recent years the shortage of cinemas has become particularly apparent, especially in the regions. Additionally, plans to expand cinemas can only be renewed if long-term economic solutions are clear.”
The analysis can be found here (in Lithuanian).