13% increase in VAT on cinema tickets labelled a “disaster” for sector with one prediction being the closure of 70% of cinemas in Spain.

Exhibitors have reunited to coorindate a response following the news last week that the Spanish governemtn was to raise VAT on cimema tickets from 8% to 21%,starting n September.

A press note relased by the FECE (Federation of Exhibitors) - which represents 80% of the sector - pointed out that “this increase will have the opposite effect pretended by the Government, cinemas will close and people will lose their job”.

Exhibitors announced a strike but then changed their minds because it “would damage even more the sector and it goes against the public”. They have expressed their willingness to negotiate with the Treasury Department.

In Spain, as in the most part of Europe, cinema tickets have a reduced VAT. After this change, Spain will have the highest tax in the EU. Italy has 10%, Holland (6%), France (7%) or Belgium (6%).

Juan Ramón Gómez Fabra, speaker of the FECE, has said to a national newspaper that this measure will lead to the shut of “70% of the cinemas in Spain. Some exhibitors are talking about using canons”. Meawhile, Pedro Pérez, president of FAPAE (producers association) has declared that the new VAT means “the death of cinema”.

“It’s a catastrophe”, says Enrique González Kuhn, owner of Alta Classic distribution and Renoir cinemas. “We have lost 12% of spectators from last year, we are in the process of digitalizing the cinemas and we cannot afford this raise. The only winner here will be piracy”.

Exhibitors clame that the new piracy act, working since spring, is not having an effect. The sector caculates the losses in $13.400m only in 2011 with a piracy rate of 70%. “The Government has only given us a response about one of the 33 illegal websites that we have denounced”, says FECE.

In the last months, Renoir has shut more than 30 screens in Bilbao, Barcelona and Zaragoza. Overall, Spain has lost 378 cinemas in the last decade.