Higher VAT Rates on Digital Publications Allowed by EU Law

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By Joe Kirwin

Sept. 8 — Denying digital publications the same low VAT rates that print publications enjoy is consistent with European Union law, the EU's top legal adviser said.

Court of Justice Advocate General Juliane Kokott concurred with previous court jurisprudence in an opinion that found different VAT rates for printed and digital publications are legal because competition doesn't always exist between the two types of products.

In a news release summarizing the opinion, the ECJ said the “VAT Directive is valid in so far as it applies the reduced rate of tax only to printed books, newspapers and periodicals, as well as to digital books that are supplied by means of a physical medium.”

The opinion, which comes only a few months before the European Commission is due to propose legislation allowing reduced value-added tax rates for digital publications, maintained that differences between digital and printed publications is compatible with the principle of equal treatment.

The final ECJ ruling in the case is due in the next three months; in 80 percent of all cases, the ECJ judgment concurs with the opinion of the ECJ Advocate General.

Does Competition Exist?

“As the Court of Justice has already held, with regard to books, competition does not necessarily exist between their digital versions on physical supports and their paper versions,” Kokott said in the news release. “Rather, the existence of such competition is dependent on a number of factors that may not only differ from Member State to Member State, but may also vary over time.”

Kokott added that “where the factual circumstances are unclear in this way, it is primarily for the EU legislature, and not for the Court of Justice, to undertake, within the scope of its legislative discretion, the complex assessment of a competitive situation across the European Union.”

Public Consultation

Previously, the ECJ backed a legal challenge by the European Commission against France and Luxembourg, which allowed reduced VAT rates on electronic books (213 ITM, 10/26/12).

However, since the ruling the European Commission has reversed itself. The EU executive body is currently holding a public consultation on allowing reduced VAT rates for digital publications in advance of legislation due out by the end of 2016.

European newspapers, magazine and books publishers have lobbied intensively to allow digital publications to benefit from the same reduced VAT rates imposed on printed publications.

Newspapers insist lower VAT rates on online sales are crucial as advertising revenue shrinks due to dramatically falling subscription rates for printed newspapers.

Both the EU newspaper and book publishing industry also reject arguments that costs to deliver digital publications are significantly less that those incurred by printed publications.

By Joe Kirwin

To contact the reporter on this story: Joe Kirwin in Brussels at correspondents@bna.com

To contact the editor responsible for this story: Rita McWilliams at rmcwilliams@bna.com

For More Information

Text of Kokott's opinion is at http://src.bna.com/ipG. Text of the news release summarizing the opinion is at http://curia.europa.eu/jcms/upload/docs/application/pdf/2016-09/cp160091en.pdf.

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