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UK Zero-Rate VAT On Print Under Threat

by Robert Lee,, London

22 January 2013

A member of the VAT Practitioners Group (VPG) has warned that Britain's zero-rate value-added tax on books, newspapers, and magazines may be at threat following a European Commission consultation on reduced VAT rates, and that the European Union needs a precise and narrow definition of an "e-book."

The consultation asked respondents whether any current reduced rate is distorting competition within the Single Market, and how similar goods and services should be treated for VAT purposes, taking into account technological developments. Ruth Corkin, who chairs the VPG's National Technical Committee, warned that under a compromise, a reduced rate may be introduced for reading matter, and that imprecise definitions of electronic services could result in distortions in rates across the EU.

Corkin argues that the definition of an e-book "should be restricted to a book in electronic format consisting of text and/or illustrations in a similar way to that of a printed book. If the product goes beyond a paper book or audio book for the blind and has features such as moving images or performed music, it should be considered to be a supply of electronic services and taxed accordingly. However, if it reflects the qualities of a paper book it clearly makes sense to tax it in the same way as a printed book."

She added: "Electronic newspapers, magazines, periodicals and journals should be taxed in the same way as their printed form if they have the same characteristics as their traditional counterparts. However, given advances in technology, this should not be restricted just to the printed word but also include articles and content that has embedded links and other media that can be accessed at the choosing of the reader to enhance the reading experience. For example, this could include links to other articles on the same or connected subjects or to advertisements in video clip form, which the reader can choose to access in the same way that a reader can choose to read a paper advertisement."

The consultation ended on January 3, and the European Commission will publish proposals later in the year. The removal of a reduced rate of VAT would require unanimous endorsement by EU member states.

The VAT Practitioners Group is comprised of specialists from the VAT profession, leading law firms, industry, major retailers and commerce.

TAGS: tax | European Commission | value added tax (VAT) | commerce | United Kingdom | education | e-commerce | retail | Europe

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