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Outdated tax on digital publications costs £210 million a year and stunts growth

Outdated tax on digital publications costs £210 million a year and stunts growth

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Axing VAT on digital publications could save UK consumers up to £210million and raise demand for epublications, according to new independent research released today that finds “a strong case” for zero-rating.

UK readers currently pay 20% more in VAT for ebooks, ejournals, digital magazines and online newspaper subscriptions than their identical printed equivalents, which have always been zero-rated.

The report finds “a strong case for introducing a zero rate of VAT for digital publications” and is released in the wake of a key EU ruling that means for the first time the Chancellor will have the power to remove VAT on digital publications at the forthcoming Budget.

The independent research undertaken by Frontier Economics finds:

  • The annual cost to the Exchequer of zero-rating VAT on digital publications would be approximately £155 million in 2019/20 – only 0.03% of total tax receipts.
  • That universities, libraries, government departments and the NHS could save up to £50-55 million a year in additional VAT because of the way that digital publications are currently taxed.
  • That zero rating could significantly benefit consumers through lower prices and would be especially beneficial to those on lower incomes, students, the blind and partially sighted.

Stephen Lotinga, CEO of the Publishers Association, said:

The government now has the power to axe the reading tax and with the Budget fast approaching, it’s time for the Chancellor to act.

“This new research shows the consumer and economic case for making this change is compelling and the government must act now to uphold the long-standing principle that taxation will not be a barrier to reading and learning.

“Ebooks and other digital formats are widely read by UK consumers, and vitally important for those with a disability or impairment. This deeply unfair and illogical tax makes no sense in the modern world. Readers should not be penalised for choosing to embrace digital.”

Owen Meredith, Managing Director of the PPA, said:

“Magazine brands are reaching more people than ever with cross-platform distribution and digital audiences hungry for trusted, quality content.

"It makes absolutely no sense that people accessing the same content in digital formats are hit with a 20% price premium; money that goes straight to the Treasury and does nothing to support investment in that quality journalism.

"As this report finds, the modest cost to the exchequer offers huge benefits for consumers and society, there is no logical reason for this digital tax. Now is the time for the Chancellor to act and axe the reading tax”

-ENDS-


Notes to editors
  1. The report Assessing the case for zero-rating VAT on digital publications is published today.
  2. This research was conducted by independent economic consultancy Frontier Economics, commissioned by the Publishers Association and the Professional Publishers Association.
  3. At the recent EU Economic and Financial Affairs Council meeting, a proposal was approved which would allow all member states in the EU to reduce VAT on epublications (digital versions of books, journals, magazines and newspapers).
  4. The research shows zero rating across digital publications would have an annual cost in terms of reduced VAT revenues of approximately £210 million in 2019/20, but that this would be reduced by 25% to £155 million when offset by savings to universities, libraries, government departments and the NHS of £50-55 million.
  5. Other findings from the report include:
    1. Growth in the UK publishing sector and its supply chain could further increase Exchequer revenues from corporation tax, income tax and national insurance contributions.
    2. Harmonising the treatment of physical and digital formats would result in savings to businesses and HMRC from reduced enforcement and compliance costs.
    3. Consumers will benefit from lower prices where VAT reductions are passed through into final price, including an increase in the affordability and reach of digital publications for those on lower incomes.
    4. Breakdowns around individual formats show that the cost of zero rating just ebooks would around £100 million per year and for ejournals it would be around £40 million.
  6. The Publishers Association will shortly be launching a full campaign, ‘Axe the Reading Tax’, to raise awareness about the digital VAT penalty and make the case for digital publications to be zero-rated in line with print.

Contact: Ruth Howells, Head of Communications:
d: +44 (0)20 7089 5829
m: +44 (0)7827 089 058
rhowells@publishers.org.uk

OR Kate Moffat / Laura Vaughan, FTI Consulting
+44 (0)20 3727 1000

About the Publishers Association

The Publishers Association (the PA) represents book, journal, audio and digital publishers in the UK, spanning fiction and non-fiction, academic and education publishing. UK publishing has a turnover of £5.7bn, with export income accounting for 60% of revenues. Our membership includes global companies such as Elsevier, Wiley, Pearson, Penguin Random House, Hachette and the University presses, as well as many independent publishing houses. Our objective as an association is to provide our members with the influence, insight and support necessary to compete and prosper. www.publishers.org.uk| @PublishersAssoc

About Frontier Economics

Frontier Economics is one of the largest economic consultancies in Europe with offices in Berlin, Brussels, Cologne, Dublin, London, Madrid and Paris. Frontier uses cutting-edge economics to solve complex business and policy problems, and works with leading private and public sector organisations, as well as many industry regulators.  Further information about Frontier is available at www.frontier-economics.com