EU Undeterred on Digital VAT Rates Despite Court Opinion

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By Joe Kirwin

Sept. 13 — The European Commission is committed to equalizing the value-added tax rates for digital and print publications despite a week-old legal opinion that justifies higher online rates.

The European Union's executive body insisted it will follow through with its policy reversal by the end of 2016 despite a 2015 court victory on separate rates, and the Sept. 8 European Court of Justice legal opinion (C-390/15) backing the disparate rates.

“We intend to present a proposal to bring both products in line with each other by the end of the year,” European Commission spokesman Vanessa Mock told Bloomberg BNA Sept. 9. “Meanwhile, work on an impact assessment to this effect has already started and we have also launched a public consultation to gather views.”

ECJ Backs Current VAT Law

The ECJ advocate general's legal opinion, on a case stemming from a Polish Constitutional Court challenge, found that different VAT rates for printed and digital publications are legal because competition doesn't always exist between the two types of products (175 TMIN, 9/9/16).

Not only is the European Commission undeterred by the ECJ legal opinion, but many in the European publishing industry—whether newspapers, magazines, periodicals or books—didn't flinch in their conviction that the EU must continue to pursue reduced VAT rates for digitally delivered publications.

“The current case is based on the current VAT directive and we want to believe that the European Commission's plans are forward-looking,” Nikolas Moschakis, a policy adviser for the European Publisher's Council, told Bloomberg BNA Sept. 12. “Journalistic and literary content in digital form still retains the benefits to society that were originally recognized when providing for reduced VAT rates.

“Technological transformation from analog to digital continues to progress and has become a significant part of our lives, giving the possibility to publishers to provide citizens with new formats, and this should be reflected in the VAT legislation,” Moschakis said.

Up to Legislatures

The European Magazine and Media Association noted that while the ECJ opinion “deals with the outdated law on VAT,” the ECJ legal adviser also said it is up to the EU legislature to adopt changes.

“This is what the European Commission is currently doing,” Max von Abendroth, president of the EMMA, told Bloomberg BNA Sept. 12. “President Juncker's announcement to propose an amendment that will allow member states to apply reduced, super reduced or zero rates to digital newspapers and periodicals is exactly what Europe needs if it wants to maintain a free and independent press in the digital age” (81 TMIN, 4/28/15).

The European Commission public consultation on reduced VAT rates for digital publications was launched July 25 and is open until Sept. 19. The commission is seeking the opinion of not only the publishing industry but also paper producers and the printing industry on the overall impact of the proposed legislative VAT change.

Once the legislation has been proposed, it will require the unanimous consent of all 28 EU member countries in the Council of Ministers.

“Our biggest concern at this point is that a proposal for the VAT change will get caught up in other political issues in the Council of Ministers,” Moschakis said. “As we have seen many times in the past, it can be very difficult to get the unanimous consent required for tax legislation.”

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

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