14 November 2011
Company announcement no 13-11
In the past weekend, it was disclosed that the Danish Government intends to introduce a bill that is said to result in a tax of approximately 15% on printed advertising material and total tax revenues of around DKK 400m in 2013.
When details of the implementation of the tax and the retail industry’s response thereto are clear, it will be possible to assess whether and to what degree the North Media Group will be affected by the tax.
Furthermore, it is uncertain whether the tax will be adopted when the politicians responsible evaluate on all consequences of the tax. Calculations show for instance that a tax on printed advertising material results in additional food costs of DKK 2,500-3,000 a year for a typical family. One reason for this is that prices on food in particular increase by up to 5-6% when subjected to less competition. This is supported by the new calculations made by Copenhagen Economics based on experience from a tax on printed advertising material in Austria.
Printed advertising material distributed door-to-door primarily consists of the so-called informative advertising material that promotes competition in the retail industry and contributes to keeping prices low. A reduction in the number of printed advertising material distributed door-to-door will consequently, whether through an “ads accepted" arrangement or the tax now proposed by the Government, lead to significantly higher consumer prices on food in particular – prices that today are subject to fierce competition through printed advertising material.
In addition to substantially rising consumer prices, a reduction in printed advertising material distributed door-to-door will make it difficult for especially convenience stores in rural areas of Denmark to cope in the competition with large retail chains.
A tax imposed only on printed advertising material distributed door-to-door will furthermore lead to a rise in the ads volume among others in local newspapers and dailies distributed door-to-door. And so, competition is distorted from the most effective media – namely advertising material distributed door-to-door - to less effective media. The total environmental load is thus expected to increase.
As early as 1999, the Danish Ministry of Taxation decided that managing a tax on printed advertising material is rendered impossible in that it is very difficult to define exactly what a piece of advertising material distributed door-to-door is, thus paving the way for a host of evasion opportunities. To this should be added that a unilateral tax on printed advertising material distorts competition and according to the Ministry of Taxation violates the Constitution of the Kingdom of Denmark.
In view of the problems involved in implementing this tax, the Government decided at that point not to introduce a tax on printed advertising material.
For further information please contact Mads Dahl Andersen, Chief Executive Officer of FK Distribution, at tel. +45 43 43 99 00.
Yours faithfully
North Media A/S
Lars Nymann Andersen
Chief Executive Officer
Visit us on: http://www.northmedia.dk
This document is an unofficial translation of the Danish original. In the event of any inconsistencies, the Danish version shall apply.
