The Icelandic government has pledged to cut the rate of value-added-tax it levies on recorded music goods to 7% from 24.5%, with effect from March 2007.

The music industry has long lobbied the European Union for a cut in VAT on music-related goods, with little tangible success to date. VAT on sound recordings in Europe currently ranges from 15-25%.

The Iceland initiative follows a 20-year campaign by the local national group of the IFPI, with support from local authors' and performers' organizations. "Since music is such an essential part of Icelandic culture, we believed that it was unfair to impose a higher rate of VAT on sound recordings compared to other cultural goods," comments Gunnar Gudmundsson, representative of IFPI Iceland, in a statement.

Iceland -- home to international success stories such as Sigur R?s, Bjork and her former band the Sugarcubes -- currently has the second highest rate of sales tax on recorded music in the world, behind only Hungary and Norway with rates of 25%.

Separately, the Icelandic government has unveiled the formation of Music Export Iceland, a new body to support the export of Icelandic music. The project is backed by private enterprise and the ministries of culture, foreign affairs, industry and trade.