EU adopts proposal to cut VAT on e-books

The Professional Publishers Association (PPA) has welcomed an EU decision to reduce VAT on online publications, including electronic books, newspapers and periodicals

The Economic and Financial Affairs Council (Ecofin) has adopted the proposal to amend VAT Directive (2006/112) and erase the distinction that currently exists between print publications and digital media. The European Commission said the measure would 'allow Member States to align the VAT rates they set for e‑publications, currently taxed at the standard rate in most Member States, with the more favourable regime currently in force for traditional printed publications' and said that the decision was intended to 'ensure that the unequal treatment of the two products - paper versus digital - becomes a thing of the past'.

At present, electronically supplied services such as digital publications are taxed at the standard VAT rate, which in the UK is 20%. This contrasts with traditional media, which is zero-rated.

The directive, which will come into force on the 20th day after publication in the Official Journal, will allow member states that so wish to apply reduced VAT rates to electronic publications. While super-reduced and zero rates will only be allowed for member states that currently apply them to traditional printed media, the move will likely save publishers and news outlets considerable sums. PPA praised the move as 'creating a foundation for freedom of opinion and democracy in the digital world' and emphasising press freedom ‘as one of the essential values of European democratic societies'.

Owen Meredith, PPA managing director, commented: 'PPA has long campaigned for a change to these out-dated tax rules, which have fundamentally failed to keep up with innovation in technology and the multi-platform distribution of magazine media and business information content.

'Publishers curate and deliver content to readers across platforms and the tax system should not penalise one form of delivery over another. This EU Directive is a victory for common-sense and now gives the Chancellor the ability to act in his Budget later this month to final abolish the reading tax.'

'Ending this outdated digital-penalty will benefit consumers and allow publishers to invest in quality journalistic content. In an era of fake news, where we know magazine media is trusted highly by consumers, the Chancellor should adopt this change at the earliest possibility, and end the tax penalty on digital readers.'

Other Ecofin agreements include new rules to improve the functionality of the current VAT system until the long-term VAT reform strategy has been implemented and, in the words of the European Commission, 'reduce compliance costs and increase legal certainty for businesses'. Hartwig Löger, minister for finance of Austria, said: 'This proposal is part of our efforts to modernise VAT for the digital economy, and enables us to keep pace with technological progress.'

Report by James Bunney

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