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.
At the end of January, the European Commission published its Roadmap on VAT outlining the official next steps on the dossier.
Specifically, the Commission will first propose an Action Plan this year which will include the main principles and features for an efficient and fraud-proof definitive regime of VAT and initiatives on VAT rates and e-commerce in the context of the Digital Single Market Strategy for Europe.
In the context of this general VAT reform, the Commission will explore how to address the tax treatment of certain e-services, such as digital books and online publications as announced in its DSM Communication.
Our intelligence suggests that DG TAXUD (the services responsible for VAT) is currently working on various options from do nothing (unlikely!) to full harmonisation, liberalisation or somewhere in between!
A model allowing Members States some flexibility on exceptions, for areas like the press, might finally be considered by the European Commission. We would like to believe that this is indeed the way that the Commission will go, as this idea was reflected in Commissioner Moscovici’s recent statements that the EU could draw up a new list of exceptions, or Member States could draft their own exceptions, in a move that would give them more lee-way in choosing goods that should benefit from a lower tax rate.
Meanwhile, several member states have pressed the Commission to review the VAT system, partly due to technological developments. 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 are set to present this Action Plan in the spring this year.
We’ll be blogging and tweeting any updates.
Meanwhile, you can contact us for more information and/or read our latest position at: http://epceurope.eu/wp-content/uploads/2013/10/EPC-response-to-the-review-VAT-reduced-rates_December-2012.pdf
European Commission Road Map on VAT: http://ec.europa.eu/smart-regulation/roadmaps/docs/2016_taxud_005_vat_action_plan_en.pdf