The VAT issue has been reactivated at EU level and publishers continue our call for e-publishing to be taxed at the same reduced or even zero rates as physical publishing throughout the European Union. Looking back at our own EPC archive, there is a position paper from 2003 with the same arguments that still apply today. Our arguments for zero or reduced VAT rates are even more pertinent now when you consider the explosion in production, distribution and consumption of digital content in the past 13 years. According to data in our current Global Media Trends Book, the number of people using mobile to read newspapers in the US has gone from less than 40% in March 2014 to more than 70% in March 2015. So it really makes no sense at all to treat the content consumed in a newspaper differently from the content consumed on mobile and other digital devices.
The EPC is delighted to note that the Commission’s Action Plan, presented on 7 April, promises to work on the alignment of digital VAT rates to match those of print. The text reads, “current rules do not fully take into account technological and economic developments. This is the case for e-books and electronic newspapers, which cannot benefit from reduced rates available for physical publications.”
Main points presented in the Action Plan:
- The Commission will present a definitive VAT system based on the principle of taxation in the Member State of destination of any goods – not in the place of origin as currently managed;
- The Commission questions the unanimity rule of the Council as not flexible enough to tackle fast-paced issues;
- Two options on how to give more flexibility to Member States to set VAT rates are proposed*;
- Short-term measures to tackle VAT fraud are presented;
- Simplified VAT processes proposed to help SMEs
Last year, the Court of Justice ruled against France’s and Luxembourg’s own initiative to reduce e-Book rates, saying that e-books could not benefit from lower VAT charged on paper equivalents because they were not enshrined in a law drawn up before they were invented! It must surely then be time for an update to this law to bring it in line with the 21st century!
Meanwhile, Italy has forged ahead with a new reduced 4% VAT rate on digital publications that have ISBN or ISSN codes and, interestingly, the European Free Trade Association (EFTA) has approved Norway’s plan to apply zero VAT rates to electronic news services, so maybe this will influence decisions at EU level.
Currently, EU states must levy VAT of at least 15%, but can go as low as 5% on items on the EU “reduced rate” list. This means that, should the press be added to this list, a fully harmonised regime would see the press in print and digital at a minimum of 5%.
DG TAXUD and the Commission will present a legislative proposal by the end of 2016.
We’ll be blogging and tweeting any updates. Meanwhile, you can contact us for more information.
*The two options:
Extension and regular review of the list of goods and services eligible for reduced rates, meaning that the standard VAT rate of 15% would be maintained. The list of goods and services that can benefit from the application of a reduced rate would be reviewed in the context of the transition to the definitive system and then at regular intervals, in particular taking account of political priorities. Member States would be able to submit to the Commission their views on the needs for adjustment.
Under this option all currently existing reduced rates, including derogations, legally applied in Member States would be maintained and could be included in the list of optional reduced rates available to all Member States, ensuring equal treatment.
Option 2: Abolition of the list of goods and services eligible for reduced rates
The most ambitious approach in terms of granting Member States greater rate-setting power, allowing them greater freedom on the number of reduced rates and their level. However this freedom to set VAT rates should be thus accompanied by a number of basic rules framing the cases in which reduced rates may be applied.
Also under this option all currently existing reduced rates, including derogations, legally applied in Member States would be maintained, the possibility to apply them could be made available to all Member States. The minimum standard VAT rate would be removed.