Outdated tax on digital publications costs £210 million a year and stunts growth

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”

The report Assessing the case for zero-rating VAT on digital publications is published today.