EU mulls tax cuts for online media

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The European Commission is considering the idea of lowering value added tax (VAT) rates for online media to the level of printed media wherever they diverge, in a move aimed at alleviating financial pressure on a struggling sector.

"We believe content should be taxed the same way, whether is printed or in tablets," Jan Truszczynski, director-general for education and culture at the European Commission, said yesterday (9 February) at a conference in Brussels.

Online media are currently charged higher VAT rates than their printed competitors in almost all EU countries, according to data collected by the European Newspaper Publishers' Association (ENPA).

Indeed, while printed newspapers tend to benefit from reduced or super-reduced VAT rates, web-based publications are usually subject to standard rates, which range between 15% and 25% across the EU.

Therefore, the tax gap between online and printed media can be as wide as 25 percentage points, like in Denmark, where traditional newspapers enjoy a 0% VAT rate but their electronic versions are burdened with a 25% rate.

Only Bulgaria, Finland, Poland and Slovakia apply the same rates for both print and online media, but ironically they do so by increasing rates for printed papers.

This approach seems contradictory considering that revenue from online advertising is still lower than revenue from printed adverts.

"Advertising revenues for the printed newspapers are much higher than for newspapers online – a rough estimate is that for every euro charged for a print ad, publishers can charge one cent online," argued Francine Cunningham, executive director of ENPA, which champions a 0% rate for all media, online and print alike.

Subsides or cost-cutting for the media?

Truszczynski's remarks come as the European Commission is carrying out an overhaul of the EU's VAT regime, which could possibly lead to a higher level of harmonisation of VAT rates across the bloc.

And more significantly, his comments relfect a wider debate regarding possible new forms of public support for the media industry, which is suffering from a widespread drop in revenue.

The EU press cannot escaping this global trend, having recorded a sharp decline in the number of accredited journalists in Brussels in the last five years, according to journalists' representatives.

Against this background, the idea of using EU funding to support the media is gaining momentum. "The European press is maybe not less important than European farmers," underlined Giles Merritt, secretary-general of Brussels-based think-tank Friends of Europe.

A helping hand for a shrinking press? "Maybe, yes," conceded Truszczynski, but who would be supported and what criteria would be used to select those in need remains a matter of huge debate.

Moreover, the press itself is not so keen on receiving direct public support. In some Northern European countries this is a taboo. Indeed, the risk of meddling by public authorities is higher when they have a significant financial interest in a media organisation.

"The way forward should not be subsides. But public authorities could come to help to media by reducing their cost, for instance by cutting taxes, or covering journalist-related expenses, such as telephone bills," argued Lorenzo Consoli, a member of the bureau at API/IPA, the international press association in Brussels.

Monitoring national press?

As the debate on funding the press unfolds in Brussels, the European Commission is studying ways to better protect the media against attempts to limit its freedom.

The EU commissioner in charge of media issues, Neelie Kroes, "is planning to set up an external monitoring group" charged with assessing breaches of press freedom in all member states, revealed German MEP Jorgo Chatzimarkakis (ALDE), vice-chair of the European Parliament's media intergroup.

The idea emerged after a heated debate in the Parliament last year on the freedom of the press in Italy. Fresh controversy concerning a disputed new media law in Hungary is clearly feeding interest in initiatives aimed at increasing media protection in Europe.

 

Value added tax (VAT) was first introduced to Europe in 1954, in France. In 1967, the member states of the European Economic Community agreed to replace their national turnover tax systems with a common VAT system.

In 2008, VAT receipts accounted for 21.4% of the national tax revenues of EU member states (including social security contributions), a rise of 12% since 1995. It is thus a major source of revenue for national budgets and in many member states it is the main source.

Newspapers enjoy very low VAT rates almost everywhere in the EU. Belgium, Denmark and the UK apply a 0% rate. In most EU countries it is below 8%, less than half the standard rate.

The scale of the crisis facing the press in Europe is made clear by the following figures: in 2005 there were around 1,300 journalists accredited to the EU, but in 2010 their number shrank to only 800.

 

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