Issues

Notes:

0: zero rate (exemption with refund of tax paid at preceding stage)

Belgium: Only monthly periodicals. Weekly periodicals have 0%, same as newspapers
Denmark: Newspapers are vattable in principle but with a zero rate (i.e., not VAT exempt)
Estonia: Newspapers and periodicals containing mainly publicity, private advertisements or erotic/pornographic material are at 18%
Latvia: Newspapers and Periodicals excluding those of an erotic and pornographic nature and those of a commercial and advertising nature
Lithuania: Publications containing mainly paid advertisements or erotic/pornographic publications which have been recognised a such by an authorised institution are at 18%

What is the European Commission's new plan?

The European Commission wants to simplify the present system which is a transitional regime introduced to start the process of harmonisation. They argue that, rather than try to tinker with what some regard as a current unwieldy and sometimes contradictory system, they should start virtually from scratch.

They propose:

• The extension of VAT to all economic activities
• A common place of taxation - the country of origin
• A harmonisation of the rates of taxation, preferably to a single standard rate to be agreed unanimously
• The phasing out therefore of reduced or zero rates and exemptions
• The change of status of the present VAT Advisory Committee to a formal Regulatory Body with majority, rather than a unanimous, decision taking power.

What do such changes imply?

• The extension of VAT to all economic activities – this would be a fundamental change to the whole regime of taxation currently in force. At present many "public services" (like education and health), as well as other goods (like fish or gold bullion, industrial waste) and services (like gambling and lotteries), have been exempted. The European Commissions aim is to establish a new, completely level, playing field, on which every player can be taxed.
   
• Collection in the country of origin – until the introduction of the Single Market, VAT was collected and charged at the point of consumption. But if you are to have a truly single market, there can be no tax frontiers. So the Commission argues that it is now desirable to charge tax at the point of origin and then arrange to hand over the tax collected to the country where the product or service is consumed.
  
  That means of course that they would need to establish a major centralised clearing house system to administer the transfer of revenues to their final destination.
   
• Single rate – the Commission would prefer a single standard rate of between 15% and 25%. However they recognise that more than one rate may be required and thus accept the possible need for a reduced rate. Nonetheless they "insist that apart from the existence of a reduced rate, the VAT system and the fixing of rates should not directly pursue social objectives. Member States have other social policy instruments at their disposal…….consequently the Commission…does not, at present, intend to propose the retention of the zero rate, which is often justified by means of social considerations."
  
  A single rate of 15% to 25% would clearly have dramatic effects in any sectors where VAT is currently levied at a rate below such a new rate. The publishers of newspapers, periodicals and books in many countries would suffer accordingly.
   
• Regulatory Body – this would become the most important fiscal power throughout the European Union.

How does all this affect the publishing business?

DRASTICALLY.

You will have noticed that most countries charge lower rates of VAT on the printed word than for other services or goods.

• In Greece the rate for newspapers, periodicals and books is only 4% against a standard rate of 36%;
• in Germany it is 7% against the standard of 15% and
• in the UK all three are zero rated in comparison with the normal 17.5%.

Indeed Belgium, Ireland, Denmark, Finland, Norway and the UK all rate particular aspects of the printed word at zero.

So to levy new much higher standard rates of 15% to 25% on publications would have a swift and damaging effect on some titles, reducing circulation and readership. This could in turn reduce profits and put some titles out of business. Thousands of employees would find their jobs threatened.

The rates for informational and educational multi media products are already out of step with the traditional printed word and some such publications are not able to develop as fast as is desirable. The Commission has expressly recognised that the present system of VAT "is not adapted to recent technological development leading to the introduction into the market of new business and new products such as in the telecommunications field".

But you may say these are just business arguments. There are other crucial and equally persuasive arguments for not handicapping the sources of information, education and culture.

What is so important about the word on the page?

It does not matter whether you read the pages on a computer screen or hold the paper in your hands, there is a quality to the printed word that no television program or radio report can ever equal.

News – a single newspaper can carry the word content of a dozen telecasts.

Comment – editorials and features are key elements in developing informed opinion among the public.

Education – computer programs, TV and Radio all play a very important role in educating our children but the printed word on paper or screen will remain the crucial source of information and education for generations to come.

Culture – novels, poems, biography, political treatises, philosophy, economic analysis, short stories, tomes of reference…..the list is almost endless but the lesson is clear. These are the stuff of a nation's culture and social diversity, the stuff indeed of democracy itself for without an informed and thoughtful society, you cannot maintain the debate that underpins a democratic nation.

Who else is concerned?

A lot of people. Their concern to protect the printed word from unwelcome taxation has been conspicuous.

• In 1993, the European Parliament adopted a report calling for VAT exemption for newspapers, periodicals and books.
• The then President of the Commission, Jacques Delors, as well as most of the Commissioners, came out in favour of a zero rate for the Press.
• In 1996, the European Parliament voiced its anxiety that "the information society must be driven by democratic, social, cultural and educational concerns, and not dominated by economic and technological interests".
• The European Parliament has adopted resolutions this year to support the development of "multi media products and services which are due to increase by 40% per annum over the next 10 years".
• However MEPs specifically pointed out that "books, newspapers and other written media will remain important despite the moves towards electronic publishing".
• The Parliament emphasised the "great potential for the use of new information and communication technologies for educational purposes, including tackling the problems of illiteracy and underachievement, the developing of open and distance learning, adult education, networking of schools and language learning.

Is illiteracy still a real problem?

Yes, and it is a disability we have a duty and the ability to improve radically.

You yourself will be very conscious that in a society where computer literacy is becoming vital to virtually everyone, the inability to READ a booklet like this must be a disability that holds people back from good employment as well as denying them the ability to enjoy as full a life as the rest of us. We who read constantly as part of our busy professional lives may find it hard to envisage just how disadvantaged some of our compatriots really are.

So what should we do?

While many of us have differing views on how the European Union should eventually emerge as a political force, most would like to see a more coherent tax system.

The European Commission has set out the following criteria to achieve that:

• A simple VAT system
• Neutrality (i.e. no distortions of competition)
• Legal security and effective control
• Maintenance of Member States' tax yields

Most of us would probably agree with those aims BUT, on the last point, we would like to argue strongly that one should not handicap the very means of disseminating information and education at a time when they are becoming ever more pervasive and important to every aspect of our lives. A tax on literacy is a long term lowering of a nation's tax yield. So our proposal is for a VAT rate for the word on the page that will be an economic mechanism for good, not an "instrument of social policy" which the Commission dislikes.

So what is the answer?

• Tax newspapers, periodicals and books at the same rate throughout the European Union;
• Include new multi media products which are informational and educational in that rate;
• MAKE THAT RATE ZERO.

Isn't that simply too radical?

Not at all. The Commission itself has proposed a radical overhaul of the entire scheme for VAT. We applaud many of the principles for which they argue. We are putting forward a radical solution to serve two fundamental needs: the improvement of literacy standards and the maintenance of the foundations of a well informed and democratic Europe.

What can you do?

• Please help us to get zero rating for words on the page onto the EU agenda - put it into the European Parliament's Opinion now.
• Help us to preserve the foundations of a well informed and democratic Europe.
• Help us to improve standards of literacy.
• Help us to play a vital role in the development of Europe's Information Society.