Industry bodies in publishing needed to get to the bottom of the case for a zero-rate of VAT for digital publications.
Print vs Digital
In the UK, printed books, newspapers, journals and magazines are zero-rated for VAT. In contrast, digital versions of these publications are subject to standard-rate VAT of 20%. There had been growing calls for the VAT treatment of digital publications – an increasingly large part of the market – to be brought in line with their printed equivalents.
We combined empirical analysis of publishing industry data, economic theory, and interviews and round tables with a large number of sector experts to assess the case for zero-rating e-publications.
Bringing out the benefits
Our analysis indicated that there is a strong economic case for introducing a zero rate of VAT for digital publications. This included a more rational VAT structure where the tax treatment of similar products was harmonised, benefits for consumers and the UK publishing sector, and the modest costs to the Exchequer in reduced tax revenues.
We also highlighted possible wider benefits, including increased access to information and knowledge, educational benefits and cultural enrichment.
Triggering the change
Our findings and advice have been instrumental in the road to VAT-free digital publications. In the 2020 Budget, it was announced that VAT would be removed for digital publications, starting from December 2020.