With Brexit talks stalling, the chancellor hopes to be able to deliver some good economic news and lift the mood of the nation with his budget next week. With his usual “rabbit” of freezing fuel duty already out of the hat at a cost of £800m a year the opportunity for a popular and overdue tax cut has just been offered from the most surprising of places.
In adopting the rather dull-sounding “Proposal for a Council Directive amending Directive 2006/112/EC, as regards rates of value added tax applied to books, newspapers and periodicals” earlier this month, the EU council of ministers has given the chancellor a budget gift. In a single simple tax move he can take back control from Brussels, remove complexity, and introduce fairness to an outdated tax system.
Ever since the introduction of VAT in the 1970s, the UK has applied a zero-rate to magazines, books, and newspapers. This recognises the value of reading and journalism to civic society and ensures that the tax does not act as a barrier to reading. An anomaly of tax law has thus far restricted that zero-rate to print formats, despite the markets for digital content expanding massively over the last decade. For digital-first consumers, in one of the world’s leading digital economies, a 20 per cent price penalty for choosing to read their magazine, newspaper or book via a different medium to ink on paper is patently unfair.
In the chancellor’s own words, the task of government in the digital age is to ensure that the benefits of technological progress flow to all and to ensure that businesses keep driving innovation and choice for consumers. The digital reading tax is a barrier to both.
At a time when digital consumption is growing, with all the evidence showing a remarkable improvement in ability among children who do their reading through digital routes, it is sheer madness that our government taxes reading and places a barrier to learning by doing so. The decision earlier this month by the EU’s economic and financial affairs council was a hugely encouraging breakthrough for those of us who have long campaigned to end this counterintuitive and inequitable tax regime.
For a start, economically and culturally, it makes sense. Organisations such as the Professional Publishers Association have long campaigned to ensure that the UK’s tax regime keeps pace with the internet age because it matters hugely that people are continually encouraged to read. Research has shown that reading for pleasure is a strong factor in promoting social mobility.
If greater engagement in digital content can help dismantle social, regional and generational inequalities, then there is a truly exciting opportunity here. Removing the penalty faced by readers will not only deliver more equal tax treatment, it will help to inform, educate and entertain the next generations of readers.
Then there is the ethical consideration. It cannot be right that an illogical (not to mention complicated) system of VAT controls is allowed to prevent retailers and publishers treating printed and digital magazines alike. Whether downloaded to an iPad or plucked from the shelf in your local shop, that newspaper or gardening magazine is surely entitled to the same treatment under the law.
A vibrant and diverse publishing sector is fundamentally a social good, and should be given every encouragement to grow. With fake news penetrating our democracy it is vital that the government acts to ensure the sustainability of trusted, quality, professional media. The latest Ofcom research shows that magazines are rated more favourably than any other platform for quality, accuracy, trustworthiness and impartiality by consumers. Axing the digital reading tax will unleash innovation and investment in this sector to help it thrive.
By adopting the VAT zero-rate for magazines, books and newspapers in all their forms, the chancellor would eradicate a long-standing form of tax discrimination. It would encourage publishers to invest in the quality, trusted content our consumers demand, while signalling his welcome support for the creativity, skill and talent that lies at the very heart of our industry.
This article was first published in The Times (23/10/18)