A new public consultation seeks views on the Commission’s commitment to address the inconsistency between VAT on printed and electronic publications. This is something we should all contribute to.
The debate on whether books should be subject to Value Added Tax is older than VAT itself.
We have always argued that a tax on books amounts to an inappropriate tax on knowledge. In fact, on first proposing VAT in 1969 Iain Macleod MP said: ‘On the general principle of avoiding a tax on knowledge we intend that books, journals, newspapers and broadcasting shall be at a zero rate.’
Apart from the lingering prospect of losing that zero rate, that’s the VAT regime we’ve enjoyed. The principle Macleod described 47 years ago holds today, and for years it held equally for all books, journals and newspapers (although see the note below in relation to audio).
That is, until the dawn of the ebook.
Inconsistency and how to fix it
Today, because taxation law hasn’t evolved as quickly as publishing technology, we now have the odd imbalance of the print version of a book being sold with no added VAT (as it is zero rated) while 20% VAT is added to the price tag of the same book sold electronically.
Yet the arguments against VAT on ebooks are the same as the general arguments against tax on print books. It’s a barrier to education and research, to adult literacy and to book sales in general.
It also complicates pricing when books are bundled together with downloads or you can access newspapers online as part of a print subscription.
The European Commission knows the inconsistency needs to be addressed, which is why their 2016 VAT Actions Plan seeks to tackle it. However they are concerned that this may cause imbalance in the market.
That’s why they’re inviting the views of ‘readers, authors, businesses … retailers’ and others in a new public consultation which is open until 19 September 2016.
How should you respond?
The Society of Authors has submitted a brief formal response on behalf of the membership, but we strongly encourage all our members and supporters to respond individually.
It’s a reasonably short questionnaire, but you may feel that you do not have an opinion on some of the questions asked. Don’t worry - there’s no need to answer them all. For our purposes the important questions (and our recommended answers) are as follows:
4.1 Should Member States be allowed to apply a reduced VAT rate to e-books?
Answer: Yes.
5.1 The introduction of reduced rates might require a definition of an e-book in order to distinguish between written and audio/video content for VAT purposes. This could be done at Member State level, ensuring greater flexibility, but with the consequence of diverging definitions from one Member State to another. What is your opinion with regard to a definition of the term "e-book" for VAT purposes?
Answer: No definition is needed at EU level. Member States can implement specific national definitions of the term.
6.1 Should Member States be allowed to apply a reduced VAT rate to e-newspapers and e-periodicals, too?
Answer: Yes.
7.1 The introduction of reduced rates might require a definition of an e-newspaper or an e-periodical in order to distinguish between written and audio/video content for VAT purposes. This could be done at Member State level, ensuring greater flexibility, but with the consequence of diverging definitions from one Member State to another. What is your opinion with regard to a definition of the terms "e-newspaper" and "e-periodical" for VAT purposes?
Answer: No definition is needed at EU level. Member States can implement specific national definitions of the term.
8.1, 8.2 & 8.3
Answer: No for 8.1, Yes for 8.2 and 8.3. This question is aimed at the fact that only a few countries, including the UK, are allowed to reduce VAT rates right down to zero and asks whether they should be allowed to do so in the case of ebooks and newspapers. NB: The options for 8.2 and 8.3 only appear once 'No' has been selected for option 8.1.
For all the other questions please answer as you see fit.
This is an excellent opportunity to air your views and concerns to the European Commission and, through it, to our Government. Even if you feel unable to speculate on the intricacies of tax law, don’t let that stop you calling for the basic principle that knowledge should never be taxed.
The deadline for submissions is 19 September 2016.
Complete the questionnaire online
Note: Other non-printed book items are also charged at the standard VAT rate of 20%. These include audio books and CDs and stationery, leading to a recent bizarre argument that adult colouring books should be subject to VAT at 20%. Sadly, this is not addressed in the current consultation, but you may wish to add a note suggesting that that anomaly should also be considered.