EU to cut VAT rates on digital news June 2016

The European Commission President, Jean-Claus Juncker, has this week called for the harmonization of VAT rates on printed and online newspapers and journals.

The plan is to introduce the appropriate amendments to the EU VAT Directive by June 2016. Once ratified, member states could then apply the change in their local VAT laws.

Currently, most member states operate reduced VAT rates on traditional, printed newspapers and magazines. However, most levy their standard VAT rates on the internet-based versions of the same publications. For example, Germany levies 7% and 19% on printed and electronic newspapers, respectively.

Aside from wanting to harmonise the VAT treatment on newspapers, and prevent distortions of the market, such a measure would give an important tax subsidy to the ailing newspaper industry. This sector is in long-term decline, challenged by the extensive volume of free, online content. In addition, many EU countries are looking to support the continued creation of local-language news and comment in the face of the growing popularity of English language-based media.

One of the trade associations that has long campaigned for this change, Germany’s BDZV, has pushed for the Commission to also investigate copyright and anti-trust issues surrounding Google, the US search engine.

The same issue of inconsistent VAT rates exists on printed vs electronic books. A number of countries, including France, Luxembourg, Malta and Italy reclassified e-books at the same rates as printed books. However, recently the ECJ ruled EU VAT on e-books should standard rated. This is because e-books were not included within the list of goods or services permitted to enjoy the lower, reduced rates – Appendix III EU VAT Directive.