France is set to propose a significant VAT cut for online newspapers and magazines. The proposals will see the rate fall from the standard 21% to 2.1%, which will bring digital newspapers and magazines in line with their print equivalents.
The rebellious move follows the European Commission challenging France (alongside Luxembourg) over its decision to apply the reduced VAT rate of 5.5% to e-books. The member state ignored the Commission’s warning over that issue and was referred to the European Court of Justice (ECJ) in November.
It is likely France’s latest proposals will face similar EU action, especially as the UK will seek to protect its digital media industry – subject to 20% VAT.
“The e-book ECJ hearings are imminent following pressure by the UK Treasury and German Finance Ministry,” said Richard Asquith of TMF Group. “This new French digital VAT cut is aimed at giving the failing French newspaper sector a direct tax subsidy.”
France’s move will be welcomed by taxpayers and consumers.
Some taxpayers believe charging higher rates of VAT on e-books than on the same product in paper format has negative environmental consequences.
“In the EU, paper products are in some cases subject to a lower rate of VAT, or zero rate, as compared with the same products provided in digital form which are subject to full or higher rates,” said Paul Morton, head of group tax at publishing company Reed Elsevier. “This is not encouraging the move from paper to digital which is necessary in the interests of greater efficiency and also has environmental advantages.”
The Commission maintains the reduced rates granted by France and Luxembourg are creating serious distortions of competition which is damaging to the other EU member states since customers from other states can easily purchase e-books from these two countries to take advantage of the lower rates.
