Select Committee on Science and Technology Written Evidence


Memorandum from HM Customs and Excise

  Since the introduction of VAT in 1973, books, newspapers and similar printed matter have been zero-rated, while VAT has been chargeable at the standard rate on supplies of non-printed information or data, including, for example, audiotapes[442].

  2.  When the UK introduced VAT in 1973, it meant signing up to the general agreements that covered the application of VAT throughout the Common Market. Under these and successive agreements[443], we have been able to maintain a strictly limited group of VAT reliefs for certain goods including food, books and other printed publications, most of which were exempt from the purchase tax that preceded VAT.

  3.  These European agreements establish a broad-based VAT system. While they allow the UK to retain one of the most wide-ranging and generous packages of zero rate VAT reliefs anywhere in the EU, they also prevent us from introducing any new ones. This means that, if the Government were to accept that printed and non-printed publications should be treated identically for VAT purposes, this could only be achieved by making VAT chargeable at the standard rate of 17.5% on printed publications. The Government made a manifesto commitment in 2001 to maintain the existing zero rates on food, children's clothes, public transport fares, and books and newspapers, and remains committed to defending these VAT reliefs.

  4.  Moreover, there are important differences between print and digital publications: in the format by which products are delivered; in the actual and potential content of the publications; and in how this content is accessed and used by consumers. For example, CD-ROMs and internet-based material often include search facilities, audio and video recordings, internet links and games or other interactive content, which are neither characteristic of, nor possible for a printed paper product. These differences not only mean that it would be impossible to bring digital publications within the existing zero rate for printed publications, but also make it reasonable to consider digital and printed publications separately, and on their own merits, when determining tax treatment.

April 2004

442   Clearly, the range of sources and formats of non-print information has expanded considerably since 1973, for example to include CD-ROMs, supplies made electronically over the Internet, and other "digital" formats. However, because the scope of VAT zero rates is defined on an inclusive basis-that is, that zero-rating applies to a specific and fixed list of goods and services-that scope has remained unchanged over the years and will continue to do so.. Back

443   In particular Directive 77/388-Sixth directive on the harmonisation of the laws of the member states relating to turnover taxes-common system of value added tax: uniform basis of assessment. Back

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