The European Parliament adopted by 590 votes to 8, with 10 abstentions, in line with the consultation procedure, a legislative resolution on the proposal for a Council directive amending Directive 2006/112/EC, as regards rates of value added tax applied to books, newspapers and periodicals.

As a reminder, the Commission proposal seeks to grant all Member States, the possibility to apply the same VAT rates to electronically supplied publications as Member States currently apply to printed publications.

Parliament approved the Commission proposal subject to the following amendments:

Subject matter: Members stated that the Directive shall aim at simpler, more fraud-proof and business-friendly VAT systems across the Member States, as well as keeping pace with today's digital and mobile economy. It shall:

• stimulate innovation, creation, investment and the production of new content, and facilitate digital learning, knowledge transfer and the access to, and promotion of, culture in the digital environment;
• promote reading and encourage investment in new content for publishers.

Scope of the Directive: the Commission shall clarify whether the proposed Directive also applies to brochures, leaflets and similar printed matter, children’s picture, drawing or colouring books, music printed or in manuscript form, maps and hydrographic or similar charts.

Blind and visually impaired persons: Members suggested that adapted and audio electronic books, newspapers and periodicals are to be understood as not wholly or predominantly consisting of music or video content. Therefore, reduced VAT rates could also be applied to those formats in order to facilitate access to books, newspapers and periodicals for persons who are blind, visually impaired or otherwise print-disabled.

Towards a better coordinated regime: Members noted that the flexibility granted to Member States in the context of the current proposal in no way prejudges the definitive VAT regime to be rolled out and shall not remove the need for a more coordinated, efficient and simpler system of reduced VAT rates with fewer exceptions.

Follow-up: three years following the entry into force of the Directive, the Commission shall produce a report identifying the Member States that have adopted similar reduced or super-reduced VAT rates for books, newspapers and periodicals and their electronic equivalent, and evaluate the impact of those measures in terms of budgetary implications and development of the cultural sector.

The amended text refers to a resolution of 13 October 2011 in which the European Parliament recalled that one of the key features of VAT is the principle of neutrality and, for that reason, it argued that ‘all books, newspapers and magazines, regardless of format, should be treated in exactly the same way’.

The Committee on Economic and Monetary Affairs adopted, in line with the consultation procedure, the report by Tom VANDENKENDELAERE (EPP, BE) on the proposal for a Council directive amending Directive 2006/112/EC, as regards rates of value added tax applied to books, newspapers and periodicals.

The committee approved the Commission proposal subject to the following amendments:

Subject matter: Members stated that the Directive shall aim at simpler, more fraud-proof and business-friendly VAT systems across the Member States, as well as keeping pace with today's digital and mobile economy.

Scope of the Directive: the Commission shall clarify whether the proposed Directive also applies to brochures, leaflets and similar printed matter, children’s picture, drawing or colouring books, music printed or in manuscript form, maps and hydrographic or similar charts.

Towards a better coordinated regime: Members noted that the flexibility granted to Member States in the context of the current proposal in no way prejudges the definitive VAT regime to be rolled out and shall not remove the need for a more coordinated, efficient and simpler system of reduced VAT rates with fewer exceptions.

Follow-up: three years following the entry into force of the Directive, the Commission shall produce a report identifying the Member States that have adopted similar reduced or super-reduced VAT rates for books, newspapers and periodicals and their electronic equivalent, and evaluate the impact of those measures in terms of budgetary implications and development of the cultural sector.

PURPOSE: to authorise the Member States to reduce the rates of value added tax applied to books, newspapers and periodicals.

PROPOSED ACT: Council Directive.

ROLE OF THE EUROPEAN PARLIAMENT: the Council adopts the act after consulting the European Parliament but without being obliged to follow its opinion.

BACKGROUND: Council Directive 2006/112/EC provides that Member States may apply reduced rates of value added tax (VAT) to publications on any means of physical support. However, a reduced VAT rate cannot be applied to electronically supplied publications, which have to be taxed at the standard VAT rate. In line with the Commission's Digital Single Market Strategy and in order to keep abreast of technological progress in a digital economy, Member States should be enabled to align the VAT rates for electronically supplied publications with lower VAT rates for publications on any means of physical support (minimum 15%).

In the Action Plan on VAT, the current rules on VAT rates do not fully take into account technological and economic developments with regard to e-books and electronic newspapers. It outlined that electronically supplied publications should be able to benefit from the same preferential VAT rate treatment as publications on any means of physical support.

Modernising VAT for the digital economy is also a key objective of the Digital Single Market Strategy.

IMPACT ASSESSMENT: the preferred option is the one which would enable Member States to apply reduced VAT rates lower than the current minimum of 5% or to grant exemptions with deductibility of the VAT paid at the preceding stage to the supply of publications, both on any means of physical support or electronically supplied.

It is estimated that this option could lead to a maximum decrease of VAT revenues for Member States by 2021 by EUR 4.7 billion annually, if all Member States decided to apply the current VAT rates for printed publications as well to e-publications.

CONTENT: the Commission is proposing to amend the VAT Directive in order to grant all Member States, the possibility to apply the same VAT rates to electronically supplied publications as Member States currently apply to printed publications, which include reduced (minimum 5%), super-reduced (less than 5%) and zero rates. 

The supply of pure music and video content would continue to be taxed at the standard VAT rate, as would publications that predominantly consist of music and video content. Member States would have the discretion to specify the term "predominantly" in their national VAT law. This solution would also allow Member States to continue to apply a reduced rate for audio books, audio newspapers and periodicals for people with sight loss.