The Italian government's newly adopted law providing tax breaks for small music companies has been welcomed by the music industry.

Patrick Zelnik, president of independents' trade group Impala, said the legislation -- coming on the heels of a French law that also offered music tax breaks -- recognized music as a vehicle for innovation, creativity and cultural diversity. "This is essential, especially when we consider the extent to which they are one of the main driving forces of the economy and culture," said Zelnik, who also heads the Naïve record label

Impala chairman Martin Mills, who heads the Beggars Group, said the French and Italian tax credits "represent a new opportunity for a sector of the economy which leads in innovation and fosters new talent, yet struggles with the downsides of globalization and concentration. Other territories should follow suit to promote the diversity of European music and provide new artists with as many opportunities as possible."

The measure was also backed by the IFPI. "We're very positive about such proposals -- they are definitely good news for music in Europe," said an IFPI spokesperson. "We're also trying to push other EU governments to initiate similar schemes."

The Italian tax break is part of the wider government budget, adopted at the end of December. It allows record labels with revenue of less than €15 million ($19.6 million) to write off up to €100,000 ($130,000) annually on the first and second works by new artists. The money, which can be declared in tax returns from 2007 onwards, may be spent in a number of areas, including production, accompanying videos, digitalization and promotion.

A similar measure for French music producers was given the green light by the European Commission in May 2006. The Commission -- the European Union's executive authority -- will also have to investigate the Italian aid to see whether it might distort the local markets.

The French scheme, which would provide aid of up to €10 million ($13 million) a year, covers part of the costs of production and promotion of albums of new talents and instrumental music. It is specifically targeted at music which has lesser commercial appeal, but which nonetheless could be considered "cultural products." When the Commission cleared the scheme, it said Paris had developed a system that ensured government support for media and culture, while ensuring that competition concerns are taken into account.

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