News / 24.11.2011

Publishers cut jobs in response to new tax on subscriptions

Already long before the proposal was voted into law, newspaper and magazine publishers had began to reduce staff to avert possible loss of revenue that may result from reduced circulation.

According to Federation of the Finnish Media Industry (Finnmedia), 20 newspaper publishers have already begun staff reduction consultations with trade unions aimed at reducing a total of 300 personnel.

The Union of Journalists in Finland estimates the total cost to be between 300 and 500 jobs in journalism. The VAT decision will effect the publisher's economy, but other reasons have been given for the cuts as well, like the general financial situation, says Director of the union, Petri Savolainen.

In Sanoma News and TS Group, publishers of biggest Finnish daily Helsingin Sanomat and Turun Sanomat respectively, some workers have been offered voluntary pension and severance pay.

Among the casualties in Sanoma News is the termination of one its magazines, SARA where 11 people including senior staff are in danger of losing their jobs. SARA magazines was launched 4 years ago and soon after hit a circulation of nearly 60 000.

The biggest staff reduction consultations are taking place in Otavamedia to reduce 80 staff, even though Otavamedia is a profit-making company.

However, according to Managing Director, Alexander Lindholm, they have to take precautionary measures due to the value added tax which takes effect next year, and in the face of possible recession and increased distribution costs and price of newsprint.

“Profits do not come automatically. We have to think about how we operate in the future”, Lindholm told Helsingin Sanomat last week.

Owners of Media Houses are complaining that the value-added tax could not have been introduced at a worse possible time, when circulation of magazines have plummeted and advertising revenues have not rebounded from the crisis of two years ago.

Besides that they complain that the launch of new television channels and digital media has further stiffened the competition for advertisers in a small pond of advertising market.

In introducing the valued-added of 9 per cent on newspaper and magazine subscription, the government hopes to gain 83 million euros in revenue with which to plug the hole in public finances but critics in the newspaper industry say the measure would produce more harm than benefits.

President of Finnmedia, Kai Telanne says that instead of 83 million euros that the government estimates would gain from the tax, it would rather cost the government 30 million euros because the overall impact of the value-added tax would be about 3 000 jobs losses in the newspaper sector.

The print media sector currently employs a total of 24 000 people.

The ensuing job losses will have ripple effects in other sectors.  State-owned postal service company, Itella has also announced that an introduction of VAT in the newspaper sector would cause the company to shed jobs.

Newspapers and magazines buy distribution services from Itella and if subscription falls as a result of the nine per cent increase in VAT, the company estimates that in the worst case scenario, it would shed up to 2000 jobs.

Politicians seem to justify the decision to impose a value-added tax on the fact that Finland previously did not have a value-added tax on newspapers but Lindholm points that, that is inaccurate because newspaper have all along paid a 23 per cent tax on single copies sale.

If an additional 9 per cent of value-added tax is further introduced Finland will be among the heaviest newspaper taxing countries in the whole of Europe, says Lindholm.

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