Skip to main content

Taxation: Digital Publications

Volume 794: debated on Thursday 6 December 2018


Asked by

To ask Her Majesty's Government what consideration they have given to the possibility of a flexible Value Added Tax regime to allow digital publications to be zero-rated; and whether they intend to make use of this flexibility should it come into effect.

My Lords, the Government keep all taxes under review, including the application of value added tax. Any decision to amend the VAT regime with regard to physical and electronic publications must be carefully assessed against policy, economic and fiscal considerations before reaching any conclusions.

I thank the Minister for his predictable response. He will be aware that there are hundreds and thousands of blind and partially sighted people in this country who rely on audiobooks or digital books whose print size they can alter. Now that the EU has agreed that the anomaly whereby those products are charged 20% VAT and the print books that the rest of us can rely on are zero-rated can be lifted, it is clear that whether we remain in or leave the EU the discrimination against the blind and partially sighted can be removed. Will he urge the Chancellor to do so?

The noble Lord makes a forceful case for equalising the VAT rate on e-publications and conventional publications. He rightly says that, on Tuesday, the EU decided that countries now have the freedom to make that equalisation, so we could now move to a zero rate instead of a standard rate on e-publications. Tuesday was apparently “eVAT Freedom Day”. I can tell him that the Professional Publishers Association is pursuing this with the Chancellor and the Treasury, and on 29 November the Financial Secretary wrote back to it saying: “The industry’s arguments and economic analysis are welcome to enable the Government to determine the benefits and risks both for digital business and high street retailers associated with extending the zero rate of VAT to e-publications”. I note the forceful arguments made by the noble Lord to support that case.

Is it possible to follow the examples of Italy and France, which have just removed VAT on the basis that it is a tax on learning and intellectual rights? Perhaps this is the moment we can jump in and show that, whatever happens, we will not tax our children, who have to pay through the nose for their digital materials.

The noble Lord makes the same case as made by the noble Lord, Lord Foster of Bath. On Tuesday, all countries within the EU had the freedom to change the rate from 20%, the standard rate on e-publications, down to zero. We have had that freedom for only two days, so both noble Lords are very prompt in urging us to use it. As I said, negotiations are now under way between the interested parties and the Government to assess the case. If the case is made, I am sure that the Chancellor will look at it favourably.

My Lords, perhaps I can help with a digital source of tax and welcome the recent proposal for a digital services tax, particularly given the demise of our high street. Will my noble friend ask the Chancellor either to accelerate that tax, because it is not due to come in until April 2020, or put pressure on the established tech giants to make substantial payments to the public purse until we have a proper tax at either the UK, EU or international level?

The Chancellor always welcomes suggestions for raising money in tax, rather than the representations which he normally gets to spend more. It is indeed the case that we plan to introduce the digital services tax in April 2020. It is designed to bring in £1.5 billion over the next four years and is targeted on the multinational companies operating in the digital sphere, to ensure that they pay appropriate tax on the value they derive from UK business. It is seen as an interim solution until we move to a global solution, and the UK is taking the lead in the OECD and G20 to secure that. I certainly note my noble friend’s suggestion that we should move ahead with it before 2020, and if we did that, there might be the resources to pay the sum of money that we might lose from zero-rating e-publications.

My Lords, we expected a rather more positive response from the Government. My party made clear two years ago that it was not prepared to see VAT in any shape or form increased on cultural goods. This should be recognised as a very important dimension, particularly for the special groups of people referred to already. Could he move with some degree of urgency as far as the Chancellor is concerned? The position is now quite clear in Europe and it would look remiss if Britain were to stand out in this respect.

I detect a certain degree of unanimity in the representations made so far. As I said, I have some sympathy with the argument that we should now equalise the tax on e-publications and conventional publications. We have had that freedom for only two days, so I hope the noble Lord will understand that we have not acted so far. However, meetings are under way with interested parties to develop the case. As I said earlier, if the Chancellor is convinced that a substantial case has been made, I am sure he will respond favourably.

My Lords, research from the National Literacy Trust shows that one in eight children from disadvantaged backgrounds say they do not have a book of their own at home. Have the Government, in anticipation of this potential, done any assessment of what impact zero-rated VAT would have as a way to tackle reading inequalities? Do they plan any such assessment, as so many of these children have access to a smart phone or a tablet?

Again, the noble Baroness makes the case for equalising. As far as literacy is concerned, this country has quite a good record if one looks at the international literacy standards. With e-publications for schools, at the moment the VAT can be got back through the local authorities. The noble Baroness adds reinforcements to the case that has already been made for using the freedom that we now have to equalise the rates.