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VAT for publications in EU member states


VAT is currently regulated by Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (the “VAT Directive”). Under the current rules, Member States may apply a reduced VAT rate to books, periodicals and newspapers supplied in hard copy form (this is physically or on physical means) but not to electronically-supplied services (Article 98(2) and Annex III of the “VAT Directive”) (this includes e-books, on-line newspapers and on-line periodicals).

The Commission Communication on the future of VAT adopted on 6 December 2011 announced an assessment of the current VAT rates structure. (COM(2011) 851 final) As part of this assessment exercise, a public consultation (Public consultation on the review of existing legislation on VAT reduced rates (from 8 October 2012 to 4 January 2013)) was launched and this provoked a number of significant reactions in relation to the differential VAT treatment of publications delivered on physical or digital means.


The analysis of substitutability is based on the findings from the literature, the review of competition cases and the analysis of the consumer survey.

No clear conclusion in previous literature

The academic literature studying the relationship between print and digital periodicals notes the likely cannibalisation of print by digital media, but does not offer clear conclusions on this effect as it is argued that websites can also have a positive impact in encouraging the subscriptions of publications on print.

Separated markets in competition cases

The review of the market definitions in competition cases has shown one case which delimits the market for e-books as clearly separated from publications on physical means. The conclusions are based on three technical features of e-books (storability, compatibility with electronic devices, and accessibility) and the industry’s perception of e-books belonging to a separate market segment. In another three cases the market definition was not conclusive or left open, but investigations in those cases recognised a differential feature of electronic books. The merger investigations on newspapers also concluded that the online market was a separate market.

Differences in consumers’ perceptions and valuations

Our analysis of the consumer survey shows consumers’ perceptions of the price differences between print and digital. Consumers’ valuations of the attributes of the different supports also indicate very distinct features of print and digital products.

 More than half of respondents believed that the price of digital products should be at least 50% less than the comparable printed products.

 A large proportion of respondents also found that printed and digital publications have very different appealing attributes. Printed material has advantages in terms of being able to hold it physically, is easy for the eyes and there is no need to recharge (between 37% and 60% of respondents according to different questions). Digital material appeal to consumers because it is good for the environment, is portable; and requires less storage and saves money (between 41% and 56% of respondents).

Asymmetric relationship between products

When looking at the likely migration between different supports as a result of a simulated change in price, we observe some asymmetric relationship:

 the migration from print to digital material is almost non-existent when the price of print books or periodicals increases (drops in the consumption of print material are not compensated by any increase in the consumption of digital material); but

 some migration from print to digital can be observed when the price of digital decreases (price reductions in digital reduce purchases of print), although the magnitude of such migration is small.

 the asymmetry of response is different in the case of newspapers: consumers tend to perceive the digital means as a substitute of the traditional printed publications when faced with a decrease in the price of digital newspaper (equalising down), but our results show that consumers of printed news may regard the different means as complements when faced with an increase in the price of print newspapers (equalising up), so that they react by reducing the consumption of digital news too.

Differences according to socio-economic determinants

We also looked at differences in elasticities according to social-economic determinants. Different regressions show that:

 absolute own-price elasticities for print books are smaller for households with children, suggesting that consumption in such households would decrease less (compared to other households) as a result of an increase in the price of print books;

 cross-price elasticity estimates of print book publications are significantly lower in households with children, indicating less substitutability between digital and print supports in such households.

Differences for individuals having already access to e-devices

A significant difference exists in price elasticities depending on the accessibility to e-devices. We found that respondents with access to e-devices will react more quickly to digital price changes, so some substitutability may be happening in this consumer group. However, those without access to e-devices are less price-elastic to changes in digital price and this is probably due to the barriers experienced in accessing electronic devices. The reaction of this second group is nevertheless important to understand the degree of substitutability across the whole population.

No significant changes perceived in the medium term

The publishing sector is going through rapid changes and rapid technical developments. In order to investigate how much these are influenced by the maturity of the new technologies or accessibility to the digital devices, we have analysed the relationship between elasticities and penetration rates of the devices across Member States. Our findings show that:

 there is dispersion in the own- and cross-price elasticities in both the print and digital markets, but

 there is no relationship between the estimates and the penetration rates of electronic devices.

This means that elasticities are not expected to change significantly in the medium term when take-up of digital devices increases.

It is important to stress that, even though our findings indicate that substitutability between print and digital material is very limited, we are not denying the existence of migration from print to digital material. The analysis conducted in this section is primarily concerned with migration occurring as a result of price changes. However, we are aware that that there are other important drivers (e.g. technological product innovations, demographic changes, and customers’ changing preferences) which may be responsible for the clear trends (away from print and towards digital) in the consumption of published material observed in the last decade. The impact of such effects has not been part of our analysis.

Analysis of VAT rates differences across Member States

We have found a great variation in the VAT rates for publications across Member States.

 Only two Member States (DK and BG) apply a normal rate on books. The remaining majority of Member States apply a reduced rate (ranging from 5% to 15%) with the exception of the UK and IE, which apply a zero rate.

 All but two Member States apply the normal rate for digital publications (this ranges from 18% to 27%) with the exception of FR and LU which apply a reduced rate (5.5% and 3%, respectively) without EU legal basis, in the opinion of the European Commission.

There is also great variation across the Member States in the rates for newspapers and periodicals.

 Four and five Member States apply a normal rate for newspapers and periodicals, respectively.

 The remaining Member States apply the same rates as for books with few exceptions.

The reaction of the industry

A declining sector

Revenues from print and advertising are in decline in the publishing industry. The book sector is reversing the trend with the development of digital products and revenues are expected to improve soon. The situation is less clear for newspapers and periodicals, where print editions are still cross-subsidising digital editions. This is due to limited digital circulation, low advertising revenues, and consumers’ reluctance to pay for digital products. Unlike books, the rise of the digital format is not expected to offset the loss of the print format in the newspapers and periodical sector in the short term.

Impact of VAT on prices

The analysis of the structure shows some parts of the supply chain as competitive, while others (mainly retail and distribution) show a trend towards higher concentration. It is therefore unclear whether tax changes will be passed on in full to consumers in the form of price increases or reductions. This may be particularly problematic in the equalising-down case, as the concentration in the market could mean some of the tax reductions being kept at different stages of the supply chain; which in turn would indicate that consumers do not see (or do not see fully) the effects of lowering VAT rates. There are also reasons to believe the opposite. We have learned that international retailers of digital products rely on price discounts in order to increase and maintain their market share and may have incentives to pass on fully any tax reductions.

Evaluation of impacts

To assess the potential impact of changes in VAT, we have used a model which allows for inclusion of both print and digital products, and also accounts for sales revenues from advertising (in the case of newspapers and periodicals).

Equalising up

In the equalising-up scenario, our model shows:

 A large decline in the sales for publications in print (for some large geographical markets, the decline can be as much as 30%). This is due to the large size of print publications and the high tax increase implied in the equalising-up option.

 A large increase in the tax revenue (in the order of between 100 and 300% for large geographical locations).

 The magnitude of reductions in sales of this policy option can only be compared to the loss that would be achieved after 13 years for books, 14 years for periodicals and 24 years for newspapers.

Equalising down

In the equalising-down scenario, our model shows:

 Some lost sales which are due to the emigration from print, which turn any gains in digital circulation to losses in most Member States. The resulting changes are nevertheless of a smaller magnitude: an absolute 5% change or less, across all Member States.

 A small loss (in absolute terms) in tax revenue in this case of less than 5% in most Member States, although simulations also show that some large Member State may have a reduction of 100% (UK) due to the complete drop in tax.

 The magnitude of the loss in sales is relatively small, and similar to the loss which would be sustained after one year for books and periodicals and slightly more than two years for newspapers; so it may be easier for the industry to absorb the changes.

We believe the existence of piracy will not affect our results as we assumed no migration from print to digital in the case of equalising up, and an equalising-down case should not encourage piracy. In other words, piracy will not increase due to price change.


In relation to the potential substitutability of print and electronic publications we have concluded that:

 Print and digital publications are not part of the same relevant market. This has been concluded from the assessment of competition cases.

 Consumers value print and digital products differently and this is linked to the different attributes and features of the different supports.

 Consumers are not likely to significantly substitute one product for another as a result of an impact in prices. The migration from print to digital material is almost non-existent when the price of print books or periodicals increases. Some migration from print to digital can be observed when the price of digital decreases although the magnitude of such migration is small.

 The asymmetry of response is different in the case of newspapers: consumers tend to perceive the digital means as a substitute of the traditional printed publications, when faced with a decrease in the price of digital newspaper, but perceive the two as complements if price of print newspapers increase and may react by reducing the consumption of digital news too.

 We see some differences in substitutability according to socio-economic factors: books on print are less substitutable in households with children.

 Households with access to e-devices are more likely to substitute but, on average overall, this may not compensate the lack of substitutability in households without e-devices.

 We do not believe substitutability will increase significantly in the medium term.

In relation to the potential impacts of VAT changes we have concluded that:

 A large decline in the sales for publications in print will result as a consequence of the equalising up scenario. The impact is comparable only to the reduction the sector would experience after a persistent decline of more than 10 years.

 A moderate decline in sales for publications in print will result as a consequence of the equalising-down scenario. The magnitude of the decline is comparable to the sectors’ annual downward trend, so it may be easier for the industry to absorb the changes.

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