Calls for tax relief to support investigative reporting
The government is being urged to consider proposals for new forms of tax reliefs to encourage payments for online news content and support local and investigative journalism
12 Feb 2019
An independent review on creating a sustainable future for journalism, undertaken by Dame Frances Cairncross, concludes that publishers face significant revenue challenges online and explores the case for more favourable tax treatment for online subscriptions and/or digital micropayments for news.
It recommends extending the zero-rating of VAT for printed newspapers to cover digital newspapers and magazines, including digital-only news publications, arguing that the present arrangement actively discourages publishers from developing online payment mechanisms.
The review also recommends that government gives priority to exploring the development of a form of tax relief, ideally under the Charities Act but if necessary along the lines of the creative sector reliefs, to support public-interest journalism.
It cites a report by Frontier Economics which estimated that a zero VAT rating for all digital publications (including e-books and e-magazines, as well as newspapers) would cost the Treasury £210m in 2019-20.
The report suggests that the market would grow as a result of this change in VAT rates, therefore offsetting the cost to the Exchequer with increased corporation tax, income tax and national insurance contributions from publishers performing better.
It points out that an EC Directive agreed in autumn 2018 permits member states to apply reduced or zero VAT rates to electronic publications, thereby allowing VAT rules to be aligned for electronic and physical publications. A number of other EU countries, including France and Ireland, are now either removing VAT on digital publications altogether or significantly reducing it.
Extending zero-rating to digital publications would initially benefit mainly those with successful subscription schemes: in particular, The Financial Times, The Times and Sunday Times and The Economist. The ambition would be that the concession would encourage others to innovate and experiment, developing a stream of subscription revenue.
The application of VAT currently forces publishers which offer subscriptions to both a digital and a physical product with the same content to apportion value between the two. Removing it might make digital subscriptions cheaper, or might increase their profitability to publishers. It might also encourage innovation in content or business models.
On the issue of tax relief for public interest journalism, the review notes that although in principle it is possible that an organisation pursuing journalism could be registered as a charity under the existing framework, much depends on what the organisation does and how it does it. In practice, charity law as it currently stands is probably incompatible with the role of newspapers since most are commercial endeavours with political standpoints.
One option would be to add the advancement of public-interest journalism to the list of charitable purposes in the Charities Act 2011, and the review believes the government should give this proper consideration as a priority, although it concedes this may not be straightforward.
Its ‘second-best option’ would be to build on the example of the creative sector tax relief. The review says the effect would be less generous than charitable status, but could provide a way to direct some tax relief towards investigative journalism and specific areas of reporting, especially by the local press.
Report by Pat Sweet