The Economic and Financial Affairs Council has adopted a directive which amends the existing EU VAT directive (2006/112/EC) in order to allow Member States to apply, if they so wish, the same VAT rate to e-publications such as e-books and online newspapers as for their printed equivalents, removing provisions that excluded e-publications from the favourable tax treatment allowed for traditional printed publications. It follows a proposal adopted in October.

Member States will now have the possibility to apply reduced VAT rates to e-publications. However, super-reduced and zero rates will only be allowed for Member States that currently apply them to ‘physical’ publications.

As this proposal is part of the EU’s intention to modernise value added tax for the digital economy in the context of the EU’s digital single market strategy, the new adopted rules will apply temporarily, pending the introduction of a new, ‘definitive’ VAT system (which also includes a proposal to give Member States more flexibility when setting VAT rates).

The directive will allow member states that so wish to apply reduced VAT rates to electronic publications as well. Super-reduced and zero rates will only be allowed for member states that currently apply them to ‘physical’ publications.

The press release notes that the new rules will only apply temporarily and that this may change following the introduction of a new ‘definitive’ VAT system. The Commission has issued proposals for this new system which are designed to allow members states a larger degree of flexibility in the setting of VAT rates.

CTG has welcomed this helpful development, which we supported in a 2016 response to the European Commission consultation on reduced rates for e-books.

CTG’s response noted:

“For charities the economic impact of a reduced rate for electronic publication is different to commercial publishers. Charities use publications to tell people about their work or to inform the public in an area the charity is dedicated to (such as information about conservation provided by a charity that supports conservation). For this reason the charity needs to seek funds to enable it to provide the publication, and one of these is charges for the product. The lower the charges are, the greater the dissemination of the material. However, charities will also try to generate extra funds in this way to fund the other activities (such as, in the case of the conservation charity, research into conservation or maintaining conservation sites). A lower tax burden enables more resources to go into these activities.

“Charities face a critical dilemma in the UK since the printed material has 0% tax, whereas electronic equivalents have 20% tax. In general, however, electronic delivery is more cost effective and more environmentally acceptable. This presents charities with a choice which they find invidious and confusing. Adoption of the reduced rate for such publications will close that gap and make a movement to electronic distribution easier to contemplate.

“The main output of a lot of charity backed research (particularly medical research) is new ideas and knowledge, which researchers are expected to publish as high-quality, peer-reviewed research articles, monographs and book chapters. Providing free, online access to these research documents is the most effective way of ensuring that the research we fund can be accessed, read and built upon. In turn, this will foster a richer research culture. Libraries in the UK (many of which are charities) serve as a major repository of resources and historical knowledge. To meet growing need these libraries increasingly invest in digital reference material which comes with the additional cost of 20% VAT. Many libraries are also digitising a substantial proportion of their holdings and making the content freely available on the web.

“We know that for one large charity alone, the cost of irrecoverable VAT from this exercise has been more than £10m so far. The imposition of VAT on research publications, reference materials and archives in digital format will have an serious impact on the amount of funding available to support research and maintain the resources required by researchers. Furthermore the we ask that consideration is given to extending zero rating for the services and equipment used to digitise existing research archives otherwise these important records will remain out of reach to most researchers.”