COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a Council Directive amending Directive 2016/112/EC, as regards rates of value added tax applied to books, newspapers and periodicals
Date: 2016-12-01
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: EU Member State, VAT, book trade, electronic publishing, newspaper, serial publication, tax harmonisation, tax relief

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 1.12.2016  SWD(2016) 392 final   COMMISSION STAFF WORKING DOCUMENT  IMPACT ASSESSMENT  Accompanying the document Proposal for a Council Directive  amending Directive 2016/112/EC, as regards rates of value added tax applied to books, newspapers and periodicals {COM(2016) 758 final} {SWD(2016) 393 final}  
 
 
Contents 

1. 

1.1. 

1.2. 

1.3. 

INTRODUCTION AND POLICY CONTEXT ........................................................... 4 

Aim of the valued added tax (VAT) ............................................................................ 4 

Rules on VAT rates ...................................................................................................... 4 

Recent and upcoming reforms affecting the VAT treatment of publications .............. 5 

1.3.1.  Switchover from an origin-based to a destination based VAT regime ........................ 5 

1.3.2.  Why act now? The reasons for a stepwise approach to adapt the rules on rates to the 

destination principle ..................................................................................................... 6 

2. 

2.1. 

2.2. 

WHAT IS THE PROBLEM AND WHY IS IT A PROBLEM? ................................. 7 

Overview and problem tree .......................................................................................... 7 

Problem drivers ............................................................................................................ 8 

2.2.1.  Problem driver 1: E-publications and printed publications are substitutes to some 

extent ............................................................................................................................ 8 

2.2.2.  Problem driver 2: Member States want to use VAT for social objectives, including 

for publications............................................................................................................. 8 

2.2.3.  Problem driver 3: Member States have different VAT regimes for publications as 

regards the possibility to use super-reduced or zero-rates ........................................... 9 

2.3. 

Problem 1: The current directive does not allow Member States to apply to e-
publications rates lower than the standard rate. ......................................................... 10 

2.3.1.  Views expressed in Open Public Consultation .......................................................... 11 

2.3.2.  What are the consequences of problem 1? ................................................................. 12 

2.4. 

3. 

4. 

4.1. 

4.2. 

4.3. 

4.4. 

5. 

5.1. 

5.2. 

5.3. 

Problem 2: Member States are subject to unequal treatment in their ability to use 
lower rates for publications ........................................................................................ 15 

WHY SHOULD THE EU ACT? ............................................................................... 16 

WHAT SHOULD BE ACHIEVED? ......................................................................... 17 

General objective 1: Propose a reform for VAT rates applied to e-publications as 
announced in the VAT Action Plan ........................................................................... 17 

General objective 2: Prepare the ground for the definitive VAT regime allowing for 
more freedom in setting VAT rates for Member States ............................................. 17 

Specific objective: Allow Member States to align VAT for e-publications with the 
rates currently in force for printed publications ......................................................... 17 

Indications on policy objectives from stakeholder consultation ................................ 17 

WHAT ARE THE VARIOUS OPTIONS TO ACHIEVE THE OBJECTIVES? ..... 18 

Baseline scenario: continuation of current rates applied with the possibility of 
aligning rates at the standard rate (no EU action) ...................................................... 18 

Option 1: possibility of aligning VAT rates for publications at a reduced rate ......... 18 

Option 2: possibility of aligning VAT rates for publications at a reduced rate and at a 
super-reduced or zero rate .......................................................................................... 19 

2 

 
 
6. 

6.1. 

6.2. 

6.3. 

7. 

7.1. 

7.2. 

7.3. 

8. 

9. 

9.1. 

9.2. 

ANALYSIS OF IMPACTS........................................................................................ 20 

Baseline scenario ........................................................................................................ 20 

Option 1: possibility of aligning VAT rates for publications at a reduced rate ......... 23 

Option 2: possibility of aligning VAT rates for publications at a reduced rate and at a 
super-reduced or zero rate .......................................................................................... 33 

HOW DO THE OPTIONS COMPARE? ................................................................... 36 

Objectives ................................................................................................................... 36 

Impacts ....................................................................................................................... 36 

Preferred option .......................................................................................................... 41 

MONITORING .......................................................................................................... 42 

ANNEXES ................................................................................................................. 43 

Procedural information............................................................................................... 43 

Stakeholder consultation ............................................................................................ 45 

9.3.  Who is affected by the initiative and how? ................................................................ 50 

9.4. 

Analytical models used in preparing the impact assessment ..................................... 50 

Tables and Figures 

Table 1: VAT rates applied to printed publications as at 1 August 2016 ................................ 10 

Table 2: VAT rates applied to e-publications as at 1 August 2016 .......................................... 11 

Table 3: VAT rate differentials between formats ..................................................................... 12 

Table 4: Market share of printed vs. e-books, non-EU and EU countries, 2013 ..................... 15 

Table 5: Expenditure by sector and source of revenue ............................................................ 21 

Table 6 Budgetary impact - Option 1 ....................................................................................... 24 

Table 7 Budgetary impacts - Option 2 ..................................................................................... 34 

Figure 1 Problem tree ................................................................................................................. 8 

Figure 2 Trends in e-book market shares, sales on Amazon.com ............................................ 27 

Figure 3: Comparison of options with objectives and impacts ................................................ 40 

3 

 
 
 
 
 
 
 
 
 
 
 
1. 

INTRODUCTION AND POLICY CONTEXT 

1.1. 

Aim of the valued added tax (VAT) 

VAT  is  a  general  consumption  tax  with  the  primary  aim  of  raising  revenue  for 
Member States’ budgets so as to finance the provision of public goods and social and 
other policies. Following the general consumption tax model, in the EU system one 
so-called 'standard' VAT rate is supposed to apply to the supply of most goods and 
services; however, most Member States have a long tradition of using VAT also as a 
social  policy  tool  by  applying  lower  reduced  rates  to  certain  goods  and  services 
deemed to be worthy of a preferential treatment.  

1.2. 

Rules on VAT rates 

The EU legal framework concerning VAT and in particular VAT rates is laid down 
in Council Directive 2006/112/EC of 28 November 2006 on the common system of 
value added tax1 (hereinafter the "VAT Directive"). 
  Member  States  must  apply  on  supplies  of  goods2  and  supplies  of  services3  a 

single standard rate of VAT, which may not be lower than 15%;  

 

If  they  so  wish,  Member  States  may  apply,  in  lieu  of  the  standard  rate,  a 
reduced  rate  of  no  less  than  5%4,  but  only  if  the  goods  or  services  belong  to 
one  of  24  specific  categories  of  supplies  listed  in  an  annex  of  the  VAT 
Directive (Annex III).  

  Member  States  may  individually  decide  to  restrict  the  application  of  the 
reduced rates to subsets of these 24 categories; however, they are not allowed 
to  extend  the  scope  of  reduced  rates  beyond  these  categories.  This  has  been 
confirmed  by  settled  case  law  of  the  Court  of  Justice  of  the  European  Union 
(hereinafter the "CJEU"), which clarified that the reduced rate is exceptional5. 
As a default rule, the standard rate is applicable. 
The  VAT  Directive  explicitly  excludes  electronically  supplied  services6, 
including  electronically  supplied  books,  newspapers  and  periodicals  
('e-publications') from the scope of reduced VAT rates. This rule dates back to 
2002  and  was  intended  to  facilitate  tax  compliance  for  third-country  B2C 
('business-to-consumer)  suppliers  of  electronic  services,  by  relieving  them  of 
the burden of dealing  with  different rates (standard/reduced) in  each Member 
State.    

 

The  above  framework  was  intentionally  designed  around  simple  and  general  rules, 
but ended up being considerably complicated by a multitude of derogations granted 
during the negotiations which preceded the adoption of the VAT Directive of 1992, 
as well as in the Acts of Accession to the European Union. These derogations allow 
specific Member States to apply reduced rates lower than 5% ("super-reduced rates") 

1 
2 

3 

4 

5 
6 

See http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=URISERV%3Al31057 
According to Article 14 of the VAT Directive, “supply of goods” shall mean “the transfer of the right 
to dispose of tangible property as owner”. 
According to Article 24 of the VAT Directive, “supply of services” shall mean “any transaction which 
does not constitute a supply of good”. 
Member States can maintain up to two different reduced rates and may choose which of these to apply 
to a specific category.  
Exception to the general rule that standard rate is applicable. 
Electronically supplied services are covered by the definition  of “supply of services”. Annex II to the 
VAT Directive gives an indicative list of electronically supplied services. 

4 

 
 
                                                            
to specific goods and services, or in some cases even to exempt them and deduct the 
VAT  paid  at  the  preceding  stage  (so-called  "zero  rates").  These  derogations  are 
temporary, in the sense that, although they do not expire on a specific date, they will 
expire upon the (as yet unscheduled) entry into force of the definitive regime.  

Both  the  derogations  and  the  contents  of  the  list  of  goods  and  services  eligible  for 
reduced rates are largely the result of compromise decisions taken in the Council. 

1.3. 

Recent and upcoming reforms affecting the VAT treatment of publications 

1.3.1.  Switchover from an origin-based to a destination based VAT regime  

The  above-mentioned  rules  limiting  Member  States'  autonomy  in  rate  setting  were 
directly  linked  to  the  long-term  objective  of  introducing  an  origin-based  VAT 
system. An origin-based VAT system defines the point of taxation as the place where 
the  supplier  is  located;  implying  that  the  VAT  rate  applied  is  the  one  where  the 
supplier  is  established.  This  objective  required  an  approximation  of  VAT  rates 
between Member States, because businesses established in Member States applying 
lower  VAT  rates  had  a  competitive  advantage  over  businesses  established  in  other 
Member  States,  which  would  have  had  a  direct  distortionary  effect  on  the  Internal 
Market.  Given  the  very  different  level  of  rates  applied  in  Member  States,  as  a  first 
step,  minimum  rate  levels  were  introduced  in  order  to  prevent  further  dispersion, 
although  with  extensive  temporary  derogations.  It  was  hoped  that  over  time  VAT 
rates would converge across Member States, but despite several decades of effort no 
tangible progress was achieved.  

On  12  January  2008,  the  Council  adopted  Council  Directive  2008/8/EC  aiming  at 
changing  the  rules  on  VAT  so  as  to  ensure  that  VAT  on  services  accrues  to  the 
country  where  consumption  occurs,  and  to  prevent  distortions  of  competition 
between Member States operating different VAT rates.  

Therefore  already  now,  the  vast  majority  of  supplies  of  services  are  based  on  the 
destination principle, which has been implemented progressively since 2010. The last 
milestone of the implementation – and one with direct relevance for e-publications - 
was the implementation of destination-based taxation for e-services in 2015. Since 1 
January  2015, all  B2C supplies of  telecommunications, broadcasting and electronic 
services,  which  include  all  e-publications,  are  taxable  at  the  place  where  the 
customer  resides  and  no  longer  where  the  supplier  is  located.  Any  Commission 
proposal allowing for reduced VAT rates on e-publications before 2015 could have 
created  distortions  of  competition  in  the  single  market.  At  least  it  would  have  put 
pressure  on  Member  States  to  cut  their  rates  to  match  competitors,  constituting  a 
rationale for keeping the standard rate treatment.  

Today  also  the  vast  majority  of  supplies  of  goods  are  taxed  de  facto  where  the 
customer resides, because  the place of supply should  be the place  where  the goods 
are located at the time when the supply takes place. However, in case of cross-border 
transactions  (distance  sales  below  a  certain  threshold,  which  lies  between  35.000 
euro and 100.000 euro depending on the Member State, and cross-border shopping) 
VAT is still charged according to the origin principle. 
In the Action Plan on VAT7 published on 7 April 2016 the Commission announced 
that it would present a legislative proposal to put in place a definitive VAT system8. 

7 
8 

COM(2016) 148 final; http://ec.europa.eu/taxation_customs/taxation/vat/action_plan/index_en.htm 
As part of the Regulatory Fitness and Performance Program (REFIT). 

5 

 
 
                                                            
This definitive system will rest upon the agreement of EU legislators that the VAT 
system should be based on the principle of taxation in the country of destination of 
the  goods.  This  means  that  the  taxation  rules  according  to  which  the  supplier  of 
goods collects VAT from his customer will be extended to cross-border transactions. 
Together with the destination based taxation of services, the definitive regime will be 
fully based on the destination principle.   

1.3.2.  Why act now? The reasons for a stepwise approach to adapt the rules on rates to the 

destination principle 

In the Action Plan on VAT the Commission, in line with the logic of the destination 
principle  that  removes  the  rationale  for  an  approximation  of  VAT  rates,  proposed 
granting  Member  States  greater  freedom  on  rate-setting  than  what  is  allowed  by 
current  legislation.  This  aim  should  be  achieved  in  two  steps.  The  Commission 
intends  to  present  a  narrow  proposal  with  regard  to  VAT  rates  for  electronically 
supplied publications by the end of 2016 and in 2017 a general proposal on VAT rate 
setting linked to the proposal for the definitive VAT regime.   

In  this  sense,  the  proposal  to  enable  Member  States  to  apply  lower  rates  for 
electronically  supplied  publications  is  a  first  step  in  eliminating  restrictions  for 
Member States before a general proposal on VAT rate setting in 2017. While it could 
be  argued  that  it  would  be  better  to  deal  with  e-publications  in  the  context  of  this 
general  proposal,  various  reasons  militate  in  favour  of  putting  forward  a  targeted 
proposal on e-publications at this point in time.  

The  first  reason  is  that  the  initiative  for  e-publications  is  tightly  linked  to  the 
Commission's  legislative  proposal  to  modernise  and  simplify  the  VAT  for  cross-
border e-commerce adopted at the same time as this proposal as a part of its Digital 
Single  Market  strategy  (DSM),  for  which  proposals  are  to  be  unveiled  on  30 
November  2016.  The  e-commerce  proposal  aims  in  particular  at  implementing  an 
enhanced one-stop shop (OSS) to facilitate cross-border trade. The OSS currently in 
place for electronically supplied services should in future also cover tangible goods 
traded  cross-border.  Solving  the  rates  issue  is  essential  to  the  success  of  the  DSM 
strategy  that  aims  to  take  account  of  the  realities  of  a  digital  economy  and  adapt 
current  legislation  accordingly.  Leaving  it  out  would  disregard  the  objective  of  the 
DSM strategy to make businesses and EU legislation fit for the digital economy.  

The second reason is that there is a strong and urgent demand from Member States 
for  an  initiative  on  e-publications.  Already  in  2015,  in  a  letter  to  the  Commission, 
France,  Germany,  Poland  and  Italy  demanded  an  amendment  to  the  VAT  directive 
allowing the option of applying a reduced rate not only to printed books, but as well 
to electronically supplied books. This request was shortly thereafter reiterated by the 
Council:  in  the  Council  conclusions  on  the  2016  Action  Plan  on  VAT9,  Member 
States  welcomed  "the  intention  of  the  Commission  to  present  a  proposal  for 
increased flexibility for Member States, so that they could  benefit from the existing 
reduced  and  zero  rates  in  other  Member  States"  and  invited  "the  Commission  to 
present a legislative proposal which integrates provisions concerning VAT rates for 
e-publications in the context of Digital Single Market initiatives by the end of 2016 
[…] Thus the Council conclusions represent a clear demand to enable Member States 
with  the  possibility  to  apply  reduced,  super-reduced  and  zero  VAT  rates  for 
electronically supplied publications.   

9 

Conclusions adopted by the Council at its 3468th meeting held on 25 May 2016. 

6 

 
 
                                                            
Furthermore,  three  Member  States  (Belgium,  France  and  Italy)  have  unilaterally 
introduced  super-reduced  or  zero  rates  for  certain  e-publications  in  advance  of  any 
proposal and only Belgium has returned to a standard rate subsequent to a request by 
the Commission.    

Given the support and explicit request for this initiative on the part of Member States 
and the clear link with the DSM, it would appear artificial to postpone addressing the 
specific issue of e-publications to the presentation of the general proposal on rates, as 
the  discussions  on  the  general  proposal  in  the  Council  are  likely  to  last  for  several 
years, and a delay would be particularly harmful in the fast-moving setting of digital 
technology.  The  Commission  has  therefore  taken  the  political  decision  to  bring 
forward  this  specific  proposal.  There  is  little risk  of  introducing  incoherence  in  the 
system,  because  the  general  rates  proposal  will  go  in  the  same  direction  as  the 
proposal  on  rates,  i.e.  to  grant  Member  States  a  greater  room  for  manoeuvre  in 
setting  VAT  rates.  On  the  contrary,  based  on  experience,  discussing  this  narrow 
proposal  in  the  Council  is  likely  to  provide  useful  lessons  for  the  general  proposal 
and to prepare the ground for it. 

2. 

WHAT IS THE PROBLEM AND WHY IS IT A PROBLEM? 

2.1. 

Overview and problem tree 

This  Impact  Assessment  argues  that  the  main  problems  affecting  the  taxation  of  e-
publications are two:  

1.  The  current  Directive  does  not  allow  Member  States  to  apply  to  e-
publications rates lower than the standard rate;    

2. Member States are subject to unequal treatment in their ability to use lower 
rates for publications 

The main drivers or causes for the above problems have been identified as follows: 

1.  the fact that e-publications are to some extent substitutes for print;  
2.  the fact that Member States want to use VAT for social objectives, including to 

decrease the price of printed materials;  

3.  and finally, that Member States have different VAT regimes for publications as 

regards the possibility to use super-reduced or zero-rates.  

The  most  important  consequences  of  these  problems  are  identified  as  a  cost 
disadvantage for digital publishing and the fact that those Member States that do not 
benefit  from  derogations  are  prevented  from  further  lowering  the  tax  rate  on 
publications.  Technological change,  which  has  been  leading  to  a  growing  diffusion 
of  e-publications,  and  the  switchover  to  the  destination  principle  also  influence  the 
context. This causal chain is illustrated in Figure 1 below.  

7 

 
 
Figure 1 Problem tree 

2.2. 

Problem drivers 

2.2.1.  Problem  driver  1:  E-publications  and  printed  publications  are  substitutes  to  some 

extent 

As  highlighted  by  the  results  of  the  open  public  consultation,  a  strong  current  of 
stakeholders'  opinion  holds  that  the  differences  among  the  formats  do  not  justify  a 
higher VAT treatment for e-publications, apparently on the basis of the fact that the 
content is the most essential and defining characteristic of publications, and does not 
vary with the format. 
Whereas a study10 for the European Commission found that that printed and digital 
publications  have  different  characteristics,  there  is  nevertheless  some  degree  of 
substitutability between traditional and digital publications.  

This degree of substitutability constitutes for many Member States sufficient reason 
to request the alignment of the tax treatment of the digital and the printed format. 

2.2.2.  Problem  driver  2:  Member  States  want  to  use  VAT  for  social  objectives,  including 

for publications 

VAT  is  a  general  consumption  tax  with  the  primary  aim  of  raising  revenue  for 
Member States’ budgets so as to finance the provision of public goods and social and 
other policies.  

10 

See chapter 9.4  

8 

 
 
 
 
 
                                                            
Under the general consumption tax model, a single 'standard' VAT rate is supposed 
to  apply  to  the  supply  of  most  goods  and  services.  In  practice,  however,  most  EU 
Member States have a long tradition of using VAT as a social policy tool by applying 
lower  reduced  rates  to  certain  goods  and  services  deemed  to  be  worthy  of  a 
preferential treatment. This  is apparent  in the large number of categories for which 
Annex III allows the application of reduced rates (24) and in their extensive scope, 
despite  a  consensus  on  the  part  of  economists  that  reduced  VAT  rates  are  a  rather 
costly instrument.  

The  extent  of  the  support  for  the  application  of  reduced  rates  to  publications  is 
further confirmed by the fact that, although the derogations granting Member States 
added leeway on reduced, super-reduced and zero rates were explicitly meant to be 
temporary, practically none of them has ever been phased out.  

While  Member  States  usually  apply  a  variety  of  rates  to  printed  publications, 
depending  on  their  nature  (see  table  1;  only  seven  Member  States  apply  a  single 
rate),  the  reduced  rate  clearly  dominates;  only  Bulgaria  does  not  make  use  of  the 
reduced rate option at all and applies the standard rate to all printed publications.  

In the domain of e-publications, the multiple Member States initiatives to extend to 
them  reduced  rate  treatment  clearly  shows  that  Member  States  intend  to  continue 
using VAT for social objectives.11   

2.2.3.  Problem  driver  3:  Member  States  have  different  VAT  regimes  for  publications  as 

regards the possibility to use super-reduced or zero-rates 

With  regard  to  VAT  rates,  the  VAT  Directive  in  force  treats  differently  both 
traditional printed publications and e-publications, and Member States.  

As  regards  the  distinction  for  the  format,  under  the  VAT  Directive,  printed 
publications are eligible for a reduced VAT rate, whereas e-publications must always 
be taxed at the standard VAT rate.  

As regards however the second distinction Member States are not equally placed in 
the  possibility  to  apply  super-reduced  or  zero  rates.  Owing  to  the  operation  of 
derogations that were introduced as temporary measures but did not have an explicit 
expiry  date,  France,  Italy,  Spain  and  Luxembourg  are  allowed  to  apply  rates  lower 
than  the  5%  minimum  for  reduced  rates  ('super-reduced  rates')  while  Belgium, 
Denmark,  Ireland,  Sweden  and  the  United  Kingdom  even  grant  exemptions  with  a 
right to deduct VAT occurred at the preceding stage (so-called 'zero rate'). 

The rules  on rates  set  in the VAT  Directive have  never been updated to reflect the 
adoption  of  the  destination  principle  instead  of  the  origin  principle.  This  may  be 
regarded  as  a  serious  flaw  because,  according  to  art.  113  of  the  Treaty,  the  VAT 
Directive should harmonise legislations (only) to the extent that such harmonisation 
is  necessary  to  ensure  the  establishment  and  the  functioning  of  the  internal  market 
and  to  avoid  distortion  of  competition.  Furthermore,  as  highlighted  by  optimal  tax 
theory,  the  application  of  the  destination  principle  leads  to  undistorted  producer 
prices and creates international production efficiency.  Restricting Member States in 
setting VAT rates was necessary to prepare an origin-based VAT system, but can no 

11  

See  also  recommendations  of  a  report  produced  in  the  framework  of  the  2015-2018  Work  Plan  for 
Culture  by  the  Working  Group  of  EU  Member  States'  experts  on  promoting  reading  in  the  digital 
environment: 
http://bookshop.europa.eu/en/promoting-reading-in-the-digital-environment-pbNC0116151/ 

9 

 
 
                                                            
longer be justified in a VAT regime operating under the principle of taxation at the 
destination. Thus, there is no longer a justification why some Member States do not 
have the same freedom in setting VAT rates as others. 

Destination-based  taxation  has  been  established  for  e-services  including  e-
publications  since  2015  and  with  regard  to  printed  books,  newspapers  and 
periodicals, for which all Member States were always allowed to apply reduced rates 
(and  for  some  even  super-reduced  and  zero  rates),  differences  in  rate  between 
Member  States  did  not  lead  to  any  distortion  of  competition  or  hampered  the 
functioning of the internal market. This is, because the destination principle applies 
to domestic supplies and the origin principle only applies to cross-border sales. Final 
consumers have little or no incentive to cross the border to purchase publications in 
order  to  benefit  from  lower  VAT  rates:  there  are  language  barriers,  printed 
publications are of low value and fixed prices exist for most publications.  

2.3. 

Problem 1: The current directive does not allow Member States to apply to  e-
publications rates lower than the standard rate. 

The  text  of  the  VAT  Directive  in  force  treats  differently  traditional  printed  and  e-
publications with regard to VAT rates.  

Under the VAT Directive, printed publications are eligible for a reduced VAT rate, 
whereas e-publications have to be taxed at the standard rate.  

In  addition,  9  Member  States  can  apply  super-reduced  and  zero  rates  to  physical 
publications, whereas 19 Member States cannot do so. 

Table 1: VAT rates applied to printed publications as at 1 August 2016 

Category 

Printed books 

Books on other 
physical means of 
support 

Printed 
newspapers 

Printed 
periodicals 

Number of rates  

Category 

Printed books 

Books on other 
physical means of 
support 

Printed 
newspapers 

Printed 
periodicals 

Number of rates  

DE 

7 

7 

19 

7 

7 

2 

BE 
6 
21 

BG 

20 

CZ 
10 
15 

DK 

25 

21 

20 

21 

25 

0 
6 
21 
0 
6 
21 
3 

LT 

9 

21 

9 

9 

2 

20 

15 

0 

25 

20 

15 

25 

1 

3 

2 

LU 

HU 

MT 

NL 

3 

3 

3 

3 

1 

5 

5 

5 

5 

1 

5 

5 

5 

5 

1 

6 

6 

6 

6 

1 

EE 

9 

IE 

0 

EL 
6 
23 

20 

23 

23 

9 

9 

2 

AT 

10 

20 

10 

10 

2 

9 

9 

3 

PL 
5 
23 
5 

23 

8 
23 
5 
23 
8 
3 

6 

23 

6 

23 

2 

PT 
6 
23 
6 

23 

6 
23 
6 

23 

2 

ES 
4 
21 

4 

4 

21 

4 

21 

2 

RO 

5 

5 

5 

5 

1 

FR 
5.5 
20 

5.5 

20 

2.1 

20 

2.1 

20 

3 

SI 

9.5 

HR 

5 

5 

5 
13 
25 
5 
13 
25 
3 

SK 

10 

IT 
4 
22 

4 

22 

4 

4 

22 

2 

FI 

10 

9.5 

10 

24 

9.5 

20 

9.5 

20 

1 

2 

10 
24 
10 

24 

3 

CY 

5 

LV 

12 

19 

21 

5 

12 

5 

2 

12 

2 

SE 

UK 

6 

6 

0 

0 

25 

20 

6 

[ex] 

6 

3 

0 

0 

2 

Source: Commission Services  

In  contrast,  under  the  current  text  of  the  Directive,  electronically  supplied  books, 
newspapers  and  periodicals  must  be  taxed  at  the  standard  VAT  rate.  For  VAT 

10 

 
 
  
 
 
purposes,  they  are  considered  as  electronically  supplied  services,  to  which  the 
standard  rate  applies.  Such  rates  are  in  practice  markedly  higher  than  the  rates 
applied to printed publications (see table 2). 

This rule is binding and cannot be adapted or interpreted. The Court of Justice of the 
European  Union  (CJEU)  confirmed  in  its  C-479/13  and  C-502/13  judgements  of  5 
March 2015 that France and Luxembourg are not allowed to apply a reduced rate of 
VAT  to  the  supply  of  electronic  books.  The  Court  found  that  the  VAT  Directive 
excludes  any  possibility  of  a  reduced  VAT  rate  being  applied  to  ‘electronically 
supplied services'12. 

Following  the  CJEU  judgment,  Luxembourg  has  aligned  its  VAT  treatment  of  e-
publications to the standard rate, whereas France still applies a reduced rate of 5.5% 
to  e-books  and  since  2014  a  super-reduced  rate  of  2.1%  to  the  digital  press.  After 
extending the existing zero rates for paper newspapers and periodicals to the digital 
press in 2012, Belgium has, since 1 January 2016, reverted to applying the national 
standard rate to digital newspapers and periodicals. On that same date, however, Italy 
extended  the  application  of  its  super-reduced  rate  of  4%  to  digital  newspapers  and 
periodicals, which was already applied to e-books since 1 January 2015.  

Table 2: VAT rates applied to e-publications as at 1 August 2016 

Category 
e-books 
e-newspapers / 
e-periodicals 

Category 

e-books 
e-newspapers / 
e-periodicals 

BE 
21 

21 

LT 

21 

21 

BG 
20 

20 

LU 

17 

17 

CZ 
21 

21 

HU 

27 

27 

DK 
25 

25 

MT 

18 

18 

DE 
19 

19 

NL 

21 

21 

EE 
20 

20 

AT 

20 

20 

IE 
23 

23 

PL 

23 

23 

EL 
23 

23 

PT 

23 

23 

ES 
21 

21 

RO 

20 

20 

FR 
5.5 

2.1 

SI 

22 

22 

HR 
25 

25 

SK 

20 

20 

IT 
4 

4 

FI 

24 

24 

CY 
19 

19 

SE 

25 

25 

LV 
21 

21 

UK 

20 

20 

Source: Commission Services  

To summarise, Member States are not allowed to lower VAT rates on e-publications 
and they cannot in particular align rates for e-publications with the rates currently in 
force for printed publications. 

2.3.1.  Views expressed in Open Public Consultation 

lack  of  equal 

The 
treatment  between  physical  and  electronically  supplied 
publications  being  substitutes  was  described  as  a  problem  by  a  large  majority  of 
respondents  who  provided  further  explanations.  Most  of 
these  respondents 
advocating an equal treatment draw a bigger picture and argued that Member States 
are  unjustifiably  restricted  to  lower  VAT  rates  only  for  printed  publications,  with 
negative  effects  for  digital  learning,  knowledge  transfer  and  promoting  culture  in  a 
digital economy. Member States have expressed the same view in public statements 
and  four  of  them  also  in  the  consultation.  The  fifth  Member  States  participating  in 
the  consultation  supported  the  principle  of  extending  greater  flexibility  to  Member 
States on VAT rates and the ability of Member States to make a decision to apply a 
non-standard  rate  of  VAT  to  e-publications,  but  did  not  accept  that  e-publications 
and physical books are equivalent and so should automatically be subject to the same 
rates. Finally, less than 1% of the respondents perceived the existing reduced rate for 
printed publications as a problem. 

12 

See http://curia.europa.eu/jcms/upload/docs/application/pdf/2015-03/cp150030en.pdf 

11 

 
 
 
 
                                                            
2.3.2.  What are the consequences of problem 1? 

The  immediate  consequences  are  higher  VAT  rates  on  e-publications  compared  to 
printed publications.  

Table  3  shows  the  tax  rate  differential  on  e-publications.  While  its  exact  value 
depends  on  each  Member  States  choices  on  rate  levels  and  on  the  specific  type  of 
publication, the tax disadvantage is typically quite sizeable (10-20 percentage points) 
and can reach up to 25 percentage points. 

Table 3: VAT rate differentials between formats  

VAT rates 1/8/2016 

BE 

BG 

printed books 

e-books 

VAT rate differential 
(percentage points)  

printed newspapers 

e-newspapers  

VAT rate differential  
(percentage points) 

VAT rates 1/8/2016 

printed books 

e-books 

VAT rate differential 
(percentage points)  

printed newspapers 

e-newspapers  

VAT rate differential 
(percentage points)  

0 

21 

21 

LT 

9 

21 

12 

LT 

9 

21 

12 

CZ 

10 

21 

11 

CZ 

15 

21 

6 

DK 

DE 

25 

25 

0 

7 

19 

12 

DK 

DE 

0 

25 

25 

7 

19 

12 

6 

21 

15 

20 

20 

0 

BE 

BG 

20 

20 

0 

EE 

9 

20 

11 

EE 

9 

20 

11 

AT 

10 

20 

IE 

0 

23 

23 

IE 

9 

23 

14 

PL 

5 

23 

18 

PL 

8 

23 

15 

EL 

6 

23 

17 

EL 

6 

23 

17 

ES 

4 

21 

17 

ES 

4 

21 

17 

FR 

HR 

IT 

5.5 

5.5 

0 

5 

25 

20 

4 

4 

0 

FR 

HR 

IT 

2.1 

2.1 

0 

CY 

5 

19 

14 

CY 

5 

19 

14 

SE 

6 

25 

19 

SE 

6 

25 

19 

LV 

12 

21 

9 

LV 

12 

21 

9 

UK 

0 

20 

20 

UK 

0 

20 

20 

5 

25 

20 

SK 

10 

20 

SK 

20 

20 

4 

4 

0 

FI 

10 

24 

14 

FI 

10 

24 

14 

LU 

HU  MT 

NL 

PT 

RO 

SI 

5 

18 

6 

21 

3 

17 

14 

5 

27 

22 

5 

20 

9.5 

22 

13 

15 

10 

15 

12.5 

10 

LU 

HU  MT 

NL 

3 

17 

14 

5 

27 

22 

5 

18 

13 

6 

21 

15 

AT 

10 

20 

10 

PT 

RO 

SI 

5 

20 

9.5 

22 

15 

12.5 

0 

6 

23 

17 

6 

23 

17 

Source: Commission Services  

The  current  VAT  treatment  of  e-publications  is  likely  to  have  effects  both  on  the 
supply and on the demand for e-publications.  

Digitalisation  alters  the  cost  structure  of  the  production  process.  For  e-books 
(compared  to  print  books),  a  large  share  of  variable  costs  disappear  (e.g.  printing, 
physical logistics for distribution and returns, storage, return). Some costs are partly 
shifted to other sectors (e.g. promotion, which increasingly occurs through blogs and 
social media), while new costs appear (file conversion, cataloguing, security etc., and 
costs  related  to  distributors).  There  are  also  costs  that  remain  unchanged  (e.g. 
authors).  Overall,  this  results  in  lower  costs  of  producing  e-books,  particularly 
marginal costs, while the issue is more complex for the overheads13.  

13 

This is documented in many sources. See inter alia, for a variety of countries: Communauté française 
de Belgique, Service de promotion des Lettres, Vademecum du livre numérique, Brussels, March 2011; 
Jean-François  Gayrard,  Comparaison  entre  les  coûts  de  la  chaine  du  livre  papier  et  celle  du  livre 
numérique,  Nov.  9,  2014,  available  at  http://medium.com/pour-lamour-du-lire/comparaison-entre-les-
couts-de-la-chaine-du-livre-papier-et-celle-du-livre-numerique-321c262d0d1d#.r078wiafr;  G.  Colleu, 

12 

 
 
  
 
  
 
                                                            
The  cost  impact  of  a  VAT  differential  of  an  order  of  magnitude  such  as  listed  in 
Table  3  is  large  enough  to  have  a  perceptible  impact  on  publishers.  While  no 
statistics  exist  and  costs  vary  considerably  from  one  publication  to  another,  an 
example  can  put  the  problem  in  perspective  and  give  an  idea  of  the  usual  order  of 
magnitude of these costs.  A 2010 report put typical publisher's production costs in 
the  US  at  close  to  9  dollars  for  a  hardcover  book  priced  at  26  dollars,  and  at  4.53 
dollars  for  an  e-book  priced  at  12.99  dollars14.  In  such  an  example,  the  differential 
cost  factor  for  the  publisher,  introduced  by  VAT  could  reach  up  to  73%  of  e-book 
publishing costs  (excluding  overheads).  While the actual impact  will certainly vary 
from case to case, it is generally true that very few industries would be unaffected by 
a  cost  factor  in  the  order  of  10%  of  final  prices.  The  marginal  cost  nature  of  VAT 
also speaks for an immediate impact on the market15. 

For  digital  newspapers  (as  compared  to  print  newspapers),  editorial  costs  are 
generally  higher  as  more  content  is  added  (extra  photos  or  videos)  and  content  is 
updated more frequently. Printing and delivery costs are no longer needed but there 
are additional costs, mainly technology associated costs from digital formatting and 
editing, development of apps and pay-walls and hosting. Another new and significant 
cost is the distribution fee paid to online retailers. Overall, the share of variable costs 
in  the  production  of  digital  newspapers  is  significantly  lower  than  for  print 
newspapers, and unit costs can only decline in the future as circulation and turnover 
increases.   

Digital  periodicals  (compared  to  print  periodicals)  show  similar  changes  to  that  of 
digital  newspapers.  Staff  costs  are  higher  while  paper,  printing,  binding  and 
wholesale  charges  disappear  and  additional  editorial  and  technological  production 
costs  and  distribution  fees  are  added.  Overall,  the  industry  has  unit  costs  of 
production similar or slightly higher for digital products but, similarly to newspapers, 
such costs are likely to decline in the future as circulation and turnover increases. 

In  this  context,  to  assess  the  consequences  on  the  market,  it  needs  to  be  discussed 
whether publishers affected by the tax would have the possibility of simply shifting it 
over  to  the  consumer  by  increasing  prices  without  suffering  meaningful  losses  in 
terms of sales or profits (known in economics as the issue of 'tax incidence' or who 
effectively pays for the text).  According to established economic theory, the market 
impact depends primarily on two variables, the elasticity of demand and supply.  

In non-technical terms, the first variable measures the price sensitivity of consumers 
(if  consumers  are  very  price-sensitive,  VAT  will  tend  to  be  readily  translated  into 
price  changes)  while  the  second  measures  the  reactivity  of  suppliers  to  sale  prices, 
which  is  usually  linked  to  the  characteristics  of  the  supply  chain  (a  highly 
competitive  market  will  tend  to  transfer  quickly  and  fully  any  change  in  the  VAT 
rate, in both directions, while the opposite tends to happen in a monopolistic market). 

Coûts  du  livre  papier,  coûts  du  livre  numérique:  une  comparaison,  March  2013,  available  at 
http://alliance-lab.org/archives/1072?lang=fr#.WAn8fHpRq_I;  New  York  Times,  28  February  2010, 
Math  of  Publishing  Meets  the  E-Book.  Although  these  studies  are  not  new,  the  cost  structure  is  a 
structural variable that usually evolves slowly over time, and the costs for digitalisation tend to fall over 
time.   
M. Rich, "Math of publishing meets the E-book', New York Times, 28 February 2010 
Marginal costs, particularly in competitive markets, tend to affect the price more readily than changes in 
overheads. 

14 
15 

13 

 
 
 
                                                                                                                                                                                          
Consumers' price sensitivity 

The sensitivity of consumers to increases in the price of publications, a.k.a. demand 
elasticity,  has  been  investigated  thoroughly  in  a  study  carried  out  for  the 
Commission16.  In  terms  of  the  own-price  elasticity  metric17,  it  was  found  to  fall 
within the -3.2 to -4.5 range for both print and digital. This measure indicates a high 
sensitivity  to  price;  the  price  elasticities  (i.e.  the  market  sensitivity  to  price)  were 
found  to  vary  somewhat  by  market  segment,  being  higher  for  books  than  for 
periodicals  and  newspapers.  These  estimates  are  in  line  or  slightly  above  previous 
estimates in the economic literature.  

Characteristics of the supply chain 

As  concerns  the  effect  on  the  supply  side  (elasticity  of  supply),  the  study  found  a 
more  mixed  picture,  as  some  parts  of  the  supply  chain  are  competitive  and  some 
show a trend towards concentration, which would speak for an incomplete pass-on of 
the  tax.  Costs  are  not  the  only  factor  in  price-setting,  particularly  in  oligopolistic 
market  segments  where  publishers  can  follow  a  strategy  of  pricing  above  marginal 
costs.18. An incomplete pass-on rate of, say,  50%  would imply  that roughly  half  of 
the tax leads to higher prices for e-publications and the remaining half to lower profit 
margins. Given also high demand elasticities, this leads to lower sales volumes19.  

Overall,  the  study  concluded  that  a  pass-on  rate  of  about  one  half  is  a  reasonable 
estimate. This implies that higher VAT rates contribute, though not fully, to higher 
prices  for  e-publications,  and  vice  versa.  It  also  found  that  there  could  be  some 
asymmetry in the reaction of the market to tax raises or cuts, but found evidence for 
this only in a specific market segment. The incomplete pass-on means that a higher 
VAT  rate  translates  partly  into  higher  prices  for  consumers  and  partly  into  a lower 
profit margin for publishers.  

In addition, the value represented by the reduced rate VAT treatment not available to 
e-publications is quite substantial: it amounts to one billion euro annually in the EU-
28. In case all Member States could align the rates for all publications at the lower 
level currently in place for printed publications, these VAT subsidies could increase 
to up to 3.7 billion euro annually in the longer term.20 Of course, one could question 
whether all Member States would necessarily grant e-publications the same treatment 
as  for  printed  publications;  however,  the  breadth  of  Member  States'  support  for  an 
initiative to cut rates  on e-publications  and the fact that several of them introduced 
reduced and super-reduced rates even in contravention of the directive, suggests that 

16 

17 

18 

19 

20 

"Economic study on publications on all physical means of support and electronic publications in the 
context of  VAT2013" available at 
"http://ec.europa.eu/taxation_customs/resources/documents/common/publications/studies/economic_stu
dy_vat_on_publications_finalreport.pdf 
This is defined as the expected percent change in sales following a one-percent increase in price. For 
example, given an elasticity of -3, sales would decline by three percent for every 1 percent increase in 
price.  
Some publishers are sticking to a high-price strategy for e-books, with discounts against print editions 
of only 20-25% on average, but in other cases front-line fiction e-books are available for just half the 
price of print. This is because the publications market is highly segmented, with different supply and 
demand elasticities. On the latest price trends in the e-book market, see Global eBook 2015, A report on 
market trends and developments, Rüdiger Wischenbart et al. 
For  periodicals  and  newspapers,  sales  volumes,  or  more  precisely  circulation,  take  on  a  special 
significance because the rates paid by advertisers, which make up a significant share of revenue, depend 
on circulation. Hence a drop in volumes has an effect that goes beyond the value of the forgone sales.  
A detailed description of the calculation method and assumptions is included in chapter 6.2 (option 1). 

14 

 
 
                                                            
many  Member  States  would  indeed  introduce  reduced  rates,  if  they  were  given  the 
legal possibility to do so.  

Finally,  although  the  VAT  treatment  is  only  one  aspect  and  its  impact  cannot  be 
isolated from that of many other factors influencing the development of e-publishing, 
it can be observed that the market for e-publications in the EU is less developed than 
in  the  US  or  in  other  advanced  non-EU  countries  (see  Table  4).  Even  in  the  most 
developed  EU  market,  the  UK,  the  market  share  of  e-books  is  lower  and  for  many 
Member States the market share is well below 5%.  

Table 4: Market share of printed vs. e-books, non-EU and EU countries, 2013 

Country 

US 

Canada  

Japan 

UK 

Germany 

Austria 

Spain 

Italy 

Slovenia 

Printed books 

E-books 

79.5 

83 

85 

20.5 

17 

15 

          86 

          14 

95 

95 

96 

96.2 

99 

5 

5 

4 

3.8 

1 

Note:   Figures are approximate owing to a series of methodological difficulties.  
Sources  Global eBook 2015, A report on market trends and developments, Rüdiger Wischenbart et al, 

Deloitte, 2015, Print is alive and well – at least for books.  
Available at: http://www2.deloitte.com/content/dam/Deloitte/global/Documents/Technology-Media-
Telecommunications/gx-tmt-pred15-print-alive-and-well.pdf 

2.4. 

Problem 2: Member States are subject to unequal treatment in their ability to 
use lower rates for publications  

The  derogations  to  the  VAT  directive  have  the  effect  that  Member  States  are  not 
equal in their ability to use lower rates for publications. Several Member States have 
obtained the possibility to apply super-reduced and zero rates to publications, under 
provisions  that  were  supposed  to  be  temporary  but  were  de  facto  never  abolished. 
The  several  Member  States  who  joined  the  EU  from  2004  onwards  were  not  in  a 
position to negotiate such derogations. As a result, there is a substantial dichotomy in 
the room for manoeuvre of Member States on VAT rates for publications.  

What are the consequences of problem 2? 

Although these newer Member States have the ability to use the reduced rate, these 
differences  in  rates  nevertheless  have  the  effect  of  considerably  constraining  their 
room  for  manoeuvre.  This  is  because  Member  States  can  only  introduce  up  to  two 
reduced rates which together have to cover all eligible goods and services. Thus, for 
these Member States extending further the support for publications would generally 
necessitate cutting VAT on a whole range of other supplies as well, with the inherent 
substantial  budgetary  cost,  or  restructure  completely  the  allocation  of  goods  and 
services between the two rates, which is politically extremely sensitive.  

The application of the destination principle prevents a direct distortion to the internal 
market,  but  there  is  a  fairness  problem,  because  there  is  no  longer  an  objective 
justification  for  this  difference  in  treatment.  Although  it  is  hard  to  document  the 

15 

 
 
 
 
consequences  of  a  perceived  unfairness  in  the  system,  the  fairness  issue  pops  up 
frequently in informal discussions between the Commission and Member States and 
with  regard  to  the  application  of  reduced  VAT  rates  it  has  resulted  in  various 
infringement  procedures  against  Member  States  that  wanted  to  extent  the  scope  of 
reduced  rates  to  products  that  could  benefits  from  a  reduced  rate  in  one  or  more 
Member  States  based  on  a  derogation,  but  that  were  included  in  Annex  III  of  the 
VAT Directive. Hence, addressing the fairness problem satisfactorily is an important 
prerequisite  to  ensure  the  success  of  any  legislative  proposal  in  the  field  of 
publications  and  to  prepare  the  ground  for  a  more  general  reform  of  rates,  as 
highlighted  by  the  Council  conclusions  stating  that  Member  States  should  benefit 
from the existing reduced and zero rates in other Member States21.  

3. 

WHY SHOULD THE EU ACT? 

Under  the  subsidiarity  principle,  the  EU  should  act  only  when  Member  States  (or 
even sub-national entities) cannot effectively address the problem.  

This is here the case, because Member States are obliged to apply the VAT Directive 
correctly  and 
the  VAT  Directive  prevents  Member  States  from  granting 
electronically  supplied  publications  the  same  VAT  rates  that  currently  apply  to 
printed publications. This was confirmed by the CJEU in its C-479/13 and C-502/13 
judgements of 5 March 2015. The Court has clearly stated that Member States cannot 
apply  a  reduced  rate  to  e-books  under  the  current  VAT  Directive  and  therefore,  a 
mere interpretation of the VAT Directive, or soft-law initiatives, cannot remedy the 
situation.  

Thus, an EU-level legislative initiative to amend the VAT Directive is indispensable 
in order to tackle the problem. 

The proposal constitutes an early application of the envisaged definitive VAT regime 
for  the  publication  market  in  advance  of  a  general  VAT  rate  proposal  in  2017 
without any risk of distortion in the internal market.  

Such an advanced targeted proposal is a political choice giving the particular demand 
by Member States and the uncertainty when a general VAT rate proposal would be 
adopted.  As  such  a  general  proposal  can  only  be  adopted  by  the  Council  once  the 
definitive  VAT  regime  has  been  agreed  on,  it  can  take  several  years  until  the 
envisaged  general  VAT  rate  reform  enters  into  force.  The  Commission  is  already 
now confronted with Member States that unilaterally apply lower rates than what is 
allowed  under  the  current  VAT  Directive  and  strong  Member  States'  requests  that 
require a timely solution. It is also justified to advance on this political priority area 
linked  to  the  DSM  strategy  and  to  update  the  VAT  Directive  recognising 
technological progress that continues and also justifies requires a timely reaction by 
the Commission. 

Moreover,  the  outcome  in  the  Council  negotiations  on  this  proposal  will  test  the 
waters ahead of a general VAT rate proposal providing indications on the degree of 
subsidiarity supported by the Council and as well about how the Member States will 
in practise deal with increased power in VAT rate setting.  

21 

Conclusions adopted by the Council at its 3468th meeting held on 25 May 2016. 

16 

 
 
                                                            
4. 

4.1. 

WHAT SHOULD BE ACHIEVED? 

General objective 1: Propose a reform for VAT rates applied to e-publications 
as announced in the VAT Action Plan 

In  the  Action  Plan  on  VAT  the  Commission  committed  to  present  a  proposal  on 
VAT  rates  applied  to  e-books  and  electronic  newspapers  in  2016,  which  cannot 
benefit  from  reduced  rates  available  for  physical  publications  and  to  address  this 
issue in the context of the Digital Single Market strategy.  

4.2. 

General objective 2: Prepare the ground for the definitive VAT regime allowing 
for more freedom in setting VAT rates for Member States 

The definitive VAT regime based on the destination principle will allow for greater 
diversity in VAT rates and will abolish unjustified restrictions on Member States in 
setting VAT rates. This general objective is linked to the proposal on VAT rates to 
be  presented  in  2017,  which  will  include  the  possibility  for  all  Member  States  of 
applying super-reduced and zero rates that are currently in place as derogations only 
for some Member States.  

4.3. 

Specific  objective:  Allow  Member  States  to  align  VAT  for  e-publications  with 
the rates currently in force for printed publications 

This specific objective prepares for the definitive VAT regime in an area where the 
destination  principle  has  already  been  implemented.  Member  States  have  a  long 
tradition of applying lower VAT rates to books, newspapers and periodical, but are 
forced by current rules to restrict these lower rates to physical publications. Member 
States should be allowed to apply the same VAT rates, currently in force for physical 
publications, to e-publications. 

The specific objective aims to achieve a timely solution on which all Member States 
can  agree.  Past  experience  has  shown  that  a  stand-alone  proposal  should  not  be 
subject  to  years  of  discussion  and  negotiations  in  the  Council  and  could  enter  into 
force  in  2017,  whereas  it  could  take  several  years  to  agree  on  a  general  reform  of 
rules for VAT rates for the definitive VAT regime.   

4.4. 

Indications on policy objectives from stakeholder consultation 

The  above  objectives  tally  well  with  the  indications  expressed  by  stakeholders.  In 
particular,  nearly  all  respondents  to  the  open  public  consultations  pointed  out  the 
need  to  allow  Member  States  to  align  VAT  rates  for  publications  reading  and 
elaborated on this point by highlighting a variety of societal aims of publications, e.g. 
education, science, culture and democratic society. The main theme emerging from 
the  open  public  consultations  was  that  lower  VAT  rates  for  e-publications  will 
benefit individuals and society and that the social, economic and cultural dimensions 
of reading are closely connected. Some of the respondents added that Member States 
should therefore be allowed to further promote all audio-visual or digital works, such 
as  educational  games.  However,  the  large  majority  of  respondents  advocated  a 
proposal targeted at publications.    

17 

 
 
5. 

5.1. 

WHAT ARE THE VARIOUS OPTIONS TO ACHIEVE THE OBJECTIVES? 

Baseline  scenario:  continuation  of  current  rates  applied  with  the  possibility  of 
aligning rates at the standard rate (no EU action) 

The  current  VAT  Directive  does  allow  for  aligning  the  VAT  rates  of  printed  and 
electronically  supplied  publications  –  but  only  at  the  standard  VAT  rate.  However, 
all  Member  States  (except  Bulgaria)  have  a  long  tradition  of  granting  reduced  or 
even  lower  rates  to  printed  books,  newspapers  and  periodicals.  It  is  completely 
unrealistic that Member States will abolish the long-existing reduced rate.  

Accordingly,  the  baseline  scenario  takes  into  account  the  VAT  rates  presently 
applied and assumes that Member States will continue to tax printed publications at 
reduced rates. It also assumes that Member States would be enabled by the general 
VAT rate proposal in  2017 to apply reduced, super-reduced and zero VAT rates to 
electronically  supplied  publications.  However,  such  a  general  VAT  rate  proposal 
would  be  subject  to  legislative  negotiations  and  the  entry  into  force  of  a  definitive 
VAT  regime  and  it  is  therefore  assumed  that  it  exceeds  the  time  horizon  of  this 
Impact Assessment of 2021. 

the  detailed  arrangements  of 

the 
Furthermore, 
implementation  of  the  extension  of  the  OSS  to  simplify  e-commerce  of  physical 
publications,  would  not  have  an  impact  on  the  publication  market,  because  they 
exceed  the  time  horizon  of  this  impact  assessment.  The  general  taxation  rules  as 
described in chapter 1 have already been adapted to the destination based principle 
and would remain in the definitive VAT regime. 

the  future  definitive  VAT, 

Consequently, the base line scenario takes only into account the VAT rates presently 
applied  and  the  current  need  for  France  and  Italy  to  apply  a  standard  rate  to  all 
electronically supplied publications. 

5.2. 

Option 1: possibility of aligning VAT rates for publications at a reduced rate  

This option would allow all Member States the possibility to apply a reduced rate to 
all  publications  including  e-publications.  This  increased  flexibility  would  however 
not  oblige  Member  States  to  lower  the  VAT  rates  for  e-publications.  The  existing 
super-reduced rates and zero rates for certain printed publications in some Member 
States would remain. 

Technically, this option consists in adapting the provisions of Annex III in the VAT 
Directive  by  eliminating  the  references  to  "all  physical  means  of  support"  and  to 
specific  formats  for  printed  publications  (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).  This  would  require  a 
legislative proposal to amend the VAT Directive.  

Striking  out  the references  to  format  and  referring  in  general  to  books,  newspapers 
and periodicals is a requirement to cover as well e-publications and Member States 
would be able to continue to restrict the application of reduced rates to certain books, 
newspapers  and  periodicals,  e.g.  by  excluding  specific  formats  or  content,  as  they 
already  do  it  now  with  regard  to  printed  publications22.  This  solution  would  also 

22 

In this context, it is worth recalling that, according to well-established VAT case law, Member States 
are  always  free  to  restrict  the  scope  of  application  of  reduced  rates,  although  they  cannot  widen  it 
beyond the categories listed in Annex III. 

18 

 
 
                                                            
allow  Member  States  to  continue  to  apply  a  reduced  rate  for  audio  books,  audio 
newspapers and periodicals for people with sight loss.  

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  then  have  the  option  of  introducing  specific 
provisions in their national VAT law in order to determine how to apply the general 
provision  in  the  Directive.  The  current  VAT  rules  already  contain  similar  general 
provisions  with  regard  to  advertising;  publications  predominantly  devoted  to 
advertising  cannot  benefit  from  a  reduced  rate,  and  Member  States  have  the 
discretion to specify the term "predominantly" in their national VAT law.    

The  option  does  not  put  forward  any  EU  level  definition  of  what  is  a  "book",  a 
"newspaper" and "periodical". This choice is based on the following considerations, 
which respect in particular the subsidiarity principle:   

1.  The  choice  is  in  line  with  Annex  III  of  the  VAT  Directive,  which  only  lists  the 
categories  of  goods  or  services  eligible  for  reduced  VAT  rates  without  providing 
definitions, whereby Member States are free to restrict the scope of each category.   

2.  A  specific  definition  of  printed  publications  has  never  existed  at  EU  level,  but 
some  Member  States  have  introduced  national  definitions  restricting  the  scope  of 
Annex III. Introducing specific definitions at EU level would on the one hand restrict 
those Member States that currently have not introduced specific definition of a book, 
newspaper  or  periodical  in  their  national  law  and  might  on  the  other  hand  oblige 
some Member States to change their existing national definitions. In general, national 
specifications  may  more  accurately  reflect  cultural  and  market  differences  between 
Member States. 

3.  E-publications  are  evolving  and  any  specific  definition  of  what  is  a  book, 
newspaper  or  periodical  risks  being  outdated  within  a  short  time.  Given  the 
unanimity requirement for EU legislation in tax matters, Member States are generally 
able to adapt the rules to future needs in a more timely fashion than the EU could. 

In  the  future,  in  case  a  Member  State  would  like  to  discuss  a  common  EU  wide 
interpretation of the terms book, newspaper and periodical, such a discussion could 
always take place in the VAT Committee, which could also issue guidelines in this 
respect.   

Finally,  the  application  of  the  destination  principle  ensures  that  there  is  no  risk  for 
the  functioning  of  the  internal  market  in  case  Member  States  apply  different 
definitions  of  electronically  supplied  books,  newspapers  and  periodicals  including 
audio and video content.  

5.3. 

Option  2:  possibility  of  aligning  VAT  rates  for  publications  at  a  reduced  rate 
and at a super-reduced or zero rate 

Option 2 is an extended version of option 1; besides the freedom to apply a reduced 
rate to e-publications, Member States would also be able to apply super-reduced or 
zero rates to all publications.  

This  extension  to  option  1  is  necessary  in  order  to  enable  all  28  Member  States  to 
align the VAT rates for e-publications with the rates they currently apply to printed 
publications and not only 19 as under option 1.   

19 

 
 
The possibility to allow for super-reduced and zero rates would be incorporated as a 
general  provision  for  all  Member  States.  Introducing  a  general  provision  only  to 
specific  Member  States  in  the  VAT  Directive,  e.g.  to  those  can  currently  derogate 
from  the  general  provisions  for  printed  publications,  is  legally  not  allowed.  Hence, 
the only possibility to allow those Member States applying a super-reduced or zero 
rate  to  printed  publications  to  align  the  VAT  rates  for  electronically  supplied 
publications  with  these  rates  is  a  general  provisions  treating  all  Member  States 
equally. 

It should be noted that the extensions of option 2 compared to option 1 is fully in line 
with those two options for a general VAT rates reform outlined in the VAT Action 
Plan. Both reform options23 in the Action Plan include the extension of derogations 
(such  as  the  zero  rates  and  the  super-reduced  rates  on  publications)  to  all  Member 
States. 

6. 

ANALYSIS OF IMPACTS 

The assessment has been carried out against the impacts on 

 

 

 

 

 

 

individual  Member  States’  budgets  (VAT  rates  applied  in  the  Member  States  
have no impact on own resources calculations and therefore the EU budget); 

consumers;  

the publishing industry (including impact on SMEs); 

the printing industry and retail sector; 

the environment; 

the simplicity of the VAT system (with impacts on public administrations, third 
countries and international trade). 

The above listed impacts cover the main economic, social and environmental impacts 
and  have  been  assessed  against  the  present  VAT  system  and  the  predicted  market 
developments as defined under the baseline scenario.  

6.1. 

Baseline scenario 

Expenditure  on  printed  books  has  declined  steadily  since  2008  and  the  overall 
downward trend is expected to continue in the coming years (Table 4). Similar trends 
are  observed  in  newspapers  and  periodicals.  Demand  in  both  market  segments 
contracted sharply from 2008 to 2009 and decreased gradually thereafter, albeit with 
a flatter downward trend for periodicals. 

E-Books 

E-books  currently  represent  a  small  share  of  the  total  European  book  industry.  In 
2010, e-books had a market share in turnover of around 2%. In 2012, the share was 
close  to  5%  due  to  rapid  growth  between  2010  and  2012.  According  to  the 
Federation of European Publishers, growth has slowed down in 2013 and 2014 and 
the market share of e-books remained at around 5%.  

Overall, the increase of market share for e-books slowed down significantly in 2014, 
or even stalled, as was the case in France and Spain. In most markets, genre fiction as 

23 

The  more  ambitious  one  abolishes  the  list  of  goods  eligible  for  the  reduced  rate,  replacing  it  with 
criteria, while the narrower one opens up the list to update it. 

20 

 
 
                                                            
well  as  self-published  titles  is  the  main  terrain  for  e-books.  However,  in  some 
countries,  notably  in  Germany  and  the  Netherlands,  e-books  have  become  popular 
also for front-list bestsellers of general fiction24. 

Until  2017  a  further  increase  in  the  market  share  of  1  to  2  percentage  points  is 
expected. 

Table 5: Expenditure by sector and source of revenue 

Note: excludes BG, LV, LT, EE, SK, MT, CY and LU. Source: PwC Global Entertainment and Media 
Outlook: 2013-2017, www.pwc.com/outlook 

Newspapers25 

Online  news  displayed  on  websites  and  digital  newspapers  have  become  a  more 
important  part  of  the  European  newspaper  industry  during  the  past  10-15  years,  as 
the sector tries to adapt to the strong impact from the shift from paper-based to online 
reading,  which  has  undermined  the  traditional  business  model  (print  circulation  in 
Europe  fell  by  20%  in  the  five  years  to  201426).  Newspapers  are  reorienting  their 
business strategy towards the digital sector: In 2011 and 2012 the turnover share of 
digital  newspapers  (without  digital  advertising  revenues)  of  total  market  turnover 
was  estimated  to  be  0.5%  and  1.2%  respectively,  whereas  the  share  is  expected  to 
increase  to  5%  in  2017.  If  digital  advertising  revenues  are  taken  into  account,  the 
share is estimated to be approximately 11% in 2017.  

24 
25 

26 

Global eBook 2015, A report on market trends and developments, Rüdiger Wischenbart et al. 
Most  of  the  data  and  conclusions  in  this  section  are  obtained  from  the  study  "Economic  study  on 
publications  on  all  physical  means  of  support  and  electronic  publications  in  the  context  of  VAT 
(2013)". 
http://ec.europa.eu/taxation_customs/resources/documents/common/publications/studies/economic_stud
y_vat_on_publications_finalreport.pdf 
at 
2015: 
WAN-IFRA,  World 
http://www.wptdatabase.org/world-press-trends-2015-facts-and-figures. Print circulation has also fallen 
in  the  US,  where  the  number  of  newspapers  published  has  shrunk  from  roughly  2700  to  about  2000 
since 2008 (New York Times, " Yes, the News Can Survive the Newspaper", Sept. 4, 2016.) 

available 

Figures, 

Trends 

Press 

Facts 

and 

21 

010,00020,00030,00040,000200820092010201120122013201420152016201720082009201020112012201320142015201620172008200920102011201220132014201520162017BooksNewspapersPeriodicalsCirculation (Print)Circulation (Digital)Advertising (Print)Advertising (Digital)   (million €)Graphs by CatProjected sales: EU 
 
 
                                                            
Periodicals27 

Digital  periodicals  currently  represent  a  small  part  of  the  total  market.  In  the  EU 
market, the turnover share of digital periodicals (without digital advertising turnover) 
was estimated to account for 0.4% of the total market turnover in 2011 and 1.35% in 
2012.  There  are  expectations  of  further  growth  to  approximately  8%  in  2017.  If 
digital advertising  revenues  are  included,  the  digital  market  share  was about  5%  in 
2012 and is expected to be more than 15% in 2017. Therefore, the digital market is 
growing for periodicals and the market share for digital periodicals is expected to be 
larger than that of digital newspapers in the future.   

Budgetary impact on Member States 

Existing  VAT  reduced  rates  for  the  purchase  of  printed  books,  newspapers  and 
periodicals would remain in place. The total VAT revenue for all books, newspapers 
and  periodicals  is  expected  to  remain  constant,  because  the  traditional  way  of 
disseminating  publications  is  expected  to  continue  on  its  slow  downward  trend, 
whereas a growth of the market for electronically supplied publications taxed at the 
standard rate is anticipated. Whereas the price of new e-publications would be lower 
compared to the printed publications that disappear and therefore the VAT revenue, 
this would be compensated for by higher VAT rate applied to e-publications.  

The  situation  is  different  in  France  and  Italy,  where  the  standard  VAT  rate  would 
need  to  be  implemented  for  all  e-publications.  Currently  France  and  Italy  apply  a 
super-reduced  rate  to  e-newspaper  and  e-periodicals.  And  with  regard  to  e-books, 
Italy currently applies a super-reduced rate and France a reduced rate. The increase 
in VAT revenue for France and Italy could amount to around 1 billion euro annually 
in the medium term. 

Impact on consumers 

There  would  be  no  impact  on  the  prices  for  printed  publications  and  electronic 
publications and hence no impact for consumers except in France and Italy where the 
rate  is  assumed  to  be  raised  to  comply  with  the  VAT  Directive.  The  gradual 
migration from print to digital would continue.  

Impact on the publishing industry 

The  market  for  printed  publications  should  continue  to  decrease  gradually  and  the 
market  for  electronically  supplied  publications  should  continue  to  grow  gradually, 
resulting  in  a  further  slight  increase  in  the  market  share  of  electronically  supplied 
publications. 

Impact on the printing and retail sector 

Printed  publications  would  continue  to  be  taxed  at  lower  rates  compared  to 
electronically  supplied  publications  and  no  impact  is  assumed  on  the  printing 
industry that generates turnover from printing not only on paper, but also on plastics 
and textiles apart from the fact that printed publications would continue to decrease 
gradually.  

No trend change is assumed in the baseline scenario with regard to brick-and-mortar 
bookstores and newsstands. These businesses must adapt their business models to the 
ongoing challenge from online sales, as highlighted by the significant decrease in the 

27 

All conclusions and data in this section are obtained from the "Economic study on publications on all 
physical means of support and electronic publications in the context of VAT (2013)". 

22 

 
 
                                                            
number  of  bookstore  and  newsstands  during  the  last  decade,  for  example  by 
expanding  their  offer  of  other  products  and  services,  and  this  adaptation  process  is 
projected to continue.28  

Environmental impact 

No significant environmental impact is assumed in the baseline scenario. Migration 
from  printed  publications  to  electronically  supplied  publications  will  continue,  but 
less  than  under  the  outlined  options,  where  a  positive  environmental  impact  is 
expected.  

Impact on the simplicity of the VAT system 

The  current  VAT  rules  would  continue  to  apply  and  neither  the  cost  of  VAT 
compliance  (for  businesses)  nor  the  cost  of  VAT  collection  (for  all  Member  States 
except France and Italy) would change. 

6.2. 

Option 1: possibility of aligning VAT rates for publications at a reduced rate 

Option  1  would  allow  all  Member  States  to  apply  a  reduced  VAT  rate  to  
e-publications.  While  it  cannot  be  anticipated  with  any  certainty  whether  Member 
States  would  lower  VAT  rates  for  e-publications,  the  impact  assessment  is  carried 
out  under  the  technical  assumption  that  Member  States  would  align  the  VAT 
rates for electronically supplied publications with the VAT rates currently in place 
for printed publications as far as they could: 

  18  Member  States  would  align  the  VAT  rates  for  e-publications  and  printed 

publications at the reduced rate  

  Bulgaria would keep the standard rate for all publications.  
  The other 9 Member States are not able to align VAT rates, because they apply 
super-reduced  and  zero  rates  to  certain  printed  publications.  All  of  these  9 
Member  States  would  keep  the  super-reduced  and  zero  rates  for  certain  printed 
publications and 8 of them would apply a reduced rate to e-publications to reduce 
the VAT rate differential between formats. Denmark, which applies a zero rate to 
printed newspapers, has no reduced rates and would therefore continue to apply 
the standard rate to e-newspapers publication.  

It  should  be  stressed  that  by  construction,  this  is  a  maximalist  assumption,  as  it  is 
likely  that  not  all  Member  States  will  choose  to  lower  the  rates  on  e-publications. 
The  impact  of  the  measure  would  in  this  case  be  smaller.  From  the  public 
consultation  it  could  e.g.  be  presumed  that  there  is  currently  no  intention  in  the 
United Kingdom to lower VAT rates for certain e-publications. 

Stakeholder consultation 

A  94%  share  of  respondents  of  the  open  public  consultation  agreed  that  Member 
States  should  be  allowed  to  apply  a  reduced  VAT  rate  to  e-books  and  88%  of  the 
respondents agreed that Member States should be allowed to apply a reduced VAT 
rate to e-newspapers and e-periodicals, too. The shares were higher among readers, 
researchers  and  libraries  (98%)  compared  to  the  printing  industry  (73%)  and  the 
publishing industry (83%). 

28 

See also discussion under option 1. 

23 

 
 
 
 
                                                            
Budgetary impact on Member States 

VAT revenue on electronically supplied publications would decrease in all Member 
States  except  Bulgaria.  Given  the  present  market  share  of  e-publications,  the 
decrease  in  VAT  revenue  is  limited,  although  it  would  gradually  increase  as  the 
market share of electronically supplied publications grows over time. 

A maximum immediate decrease of VAT revenues of 5% can be expected based on 
the fact that the market share of e-publications is less than 5% in all Member States 
except the UK, but the decrease could amount up to 15% in some Member States in 
the long term by an increased market share of e-publications.  

The situation is different in France and Italy that already apply a super-reduced rate 
to e-newspaper and e-periodicals. These two countries would have to increase their 
VAT rates. Whereas Italy also had to replace the currently applied super-reduced rate 
to e-books, France could continue to apply a reduced rate to e-books.   

Table 6 Budgetary impact - Option 1 

Impact on VAT revenues29  

Books 

Newspapers, Periodicals 

Decrease of maximum 
15% 

BE, CZ, DE, EE, IE, EL, ES, HR, CY, 
LV, LT, LU, HU, MT, NL, AT, PL, PT, 
RO, SI, SK, FI, SE, UK 

BE, CZ, DE, EE, IE, EL, ES, HR, CY, 
LV, LT, LU, HU, MT, NL, AT, PL, PT, 
RO, SI, SK, FI, SE, UK 

No impact 

BG, DK, FR  

Increase of maximum 
5% 

IT 

Source: Commission Services own calculation 

BG, DK  

FR, IT 

Depending on the future market share of e-publications, which could be 20% in the 
medium  term,  there  could  be  a  loss  in  VAT  revenue  for  all  28  Member  States 
together  of  540  million  euro  annually  on  the  basis  of  current  market  shares  or  a 
maximum  of  2.2  billion  euro  annually  in  the  medium  term.  The  increase  in  VAT 
revenue  for  France  and  Italy  can  be  estimated  to  amount  to  a  maximum  of  300 
million euro per year in the medium term.  

Overall,  under  this  option  a  decrease  in  VAT  revenue  of  around  2  billion  euro 
annually could be assumed in the medium term, which represents 0.2% of the total 
VAT revenue in EU-28.  

The impact is calculated on the basis of household final consumption expenditure in 
Europe  on  books,  newspapers  and  stationery.  The  calculation  relies  on  several 
simplified assumptions, which are the following: 

  The  first  assumption  relates  to  the  additional  VAT  loss  arising  from  non-
deductible input VAT by exempt sectors and public bodies. This is estimated at 
20% of the VAT paid by households.  

  Expenditure on physical and digital books, newspapers and stationery amounted 
to EUR 91 billion in 2014. By deducting 10% to exclude miscellaneous printed 
matter and stationery and drawing materials, we estimate expenditure on books, 

29 

The impact on VAT revenues is expressed as percentage of VAT revenues accruing from each category 
(books,  newspapers  and  periodicals)  and  based  on  own  calculations  taking  into  account  the  different 
level of VAT rates applied in the Member States. 

24 

 
 
 
                                                            
newspapers and periodicals at approximately 82 billion. These figures are gross 
of  VAT.  The  bulk  of  household  expenditure  originates  from  Germany  (28%), 
France  (16%),  the  United  Kingdom  (15%),  Italy  (10%),  Spain  (5%),  Poland 
(4%), the Netherlands (4%), Belgium (2%), Austria (2%), Finland (2%), Portugal 
(2%)  and  Sweden  (2%).  The  share  of  the  other  Member  States  is  much  more 
limited and ranges from 1.4% in Denmark to 0.1% in Malta.  

  Expenditure  for  books,  newspapers  and  periodicals  has  constantly  decreased 
during the last decade, but remained stable in 2014 for the first time. On the basis 
of  this  stabilisation,  we assume  for  the  sake  of modelling that  total  expenditure 
will remain roughly constant in the future. This simplified assumption also take 
into  account  a  potential  increase  in  the  number  of  e-publications  due  to  lower 
VAT rates. Whereas, the number should increase, the expenditure should remain 
constant as new e-publications are expected to be less expensive than the printed 
publications that disappear from the market. 

  With regard to e-publications, their market share of currently 5% is expected to 
grow to 20% in the medium term and an average VAT rate differential between 
the  standard  and  the  reduced  VAT  rate  of  13.5  percentage  points  is  taken  into 
account. 

Impact on consumers 

Assuming an overall pass-on rate of 50%, consumers would benefit from a reduction 
in  prices  for  e-publications  of  nearly  7%  in  all  Member  States  except  France  and 
Italy, where consumers would face an increase of prices of 1.7 percentage points in 
France for the digital press and of 3 percentage points on all e-publications in Italy. 
Overall,  the  reduction  of  prices  for  consumers  should  amount  to  1  billion  euro  per 
year in the medium term.      

As mentioned earlier, the assumption of a pass-on of 50% is based on the assessment 
of  the  Commission  study  on  e-publications30.  A  VAT  rate  cut  does  not  necessarily 
translate  into  lower  prices,  as  some  businesses  could  opt  to  keep  final  sale  prices 
constant.  The  degree  by  which  any  VAT  cut  is  passed  on  to  consumers  generally 
depends on several factors and may well be different from one type of e-publication 
to another.  

The price setting behaviour of publishers is determined by the "willingness to pay" of 
consumers.  The  economic  literature  on  the  sensitivity  to  price  of  publications 
suggests  that  overall,  books  have  a  high  price  elasticity,  typically  exceeding  unity, 
but with large differences between and within market segments; sensitivity to price is 
typically  lower  for  newspapers,  while  magazines  fall  somewhat  in  between.  The 
overall high price elasticity shows that suppliers have an incentive to pass on VAT 
reductions to consumers, which will then benefit from lower prices. In case demand 
elasticity  is  low  (e.g.  because  readers  want  to  read  one  specific  publication  which 
they  are  unwilling  to  substitute),  the  degree  of  VAT  pass-on  will  be  more  limited. 
There  is  no  data  available  on  which  pass  on  of  VAT  for  publications  could  be 
estimated. On the basis of the study, an overall pass-on of 50% is taken as a working 
assumption to illustrate the possible impacts of a VAT cut. Based on the assumption 
of  a  pass-on  of  50%,  Consumers  would  benefit  from  a  reduction  in  e-publications 
prices  by  nearly  7%  (given  a  VAT  rate  differential  of  13.5  percentage  points) 
amounting to a maximum of around 1 billion Euro annually.      

30 

An overall pass-on of 50% has been estimated and justified by the "Economic study on publications on 
all physical means of support and electronic publications in the context of VAT (2013)".   

25 

 
 
                                                            
The  above  results  from  the  Commission  study  are  borne  out  by  the  replies  to  the 
open public consultation. According to respondents, e-books prices would go down, 
either by the amount the VAT is reduced (45%), or by less than that amount the VAT 
is reduced (39%) and only 8% expect no changes in prices. Similarly, prices for e-
newspapers and e-periodicals are expected to decline, either by less than the amount 
the  VAT  is  reduced  (42%)  or  by  the  amount  the  VAT  is  reduced  (32%)  and  only 
12%  assume  that  prices  will  remain  the  same.  While  a  plurality  of  respondents 
expects the VAT cut to be fully passed on, an equal share expects a less than full or 
zero pass-on.  

The  expected  decline  in  prices  will  result  in  a  corresponding  increase  in  sales 
volumes for electronically supplied publications, but the extent to which lower prices 
for  electronically  supplied  publications  will  increase  sales  will  also  depend  on  the 
diffusion  of  suitable  electronic  reading  devices:  consumers  with  access  to  such 
devices will react more quickly to digital price changes, while those without access 
to  electronic  devices  may  be  reluctant  to  change  over  to  e-reading  irrespective  of 
price cuts. 

This is likely to impact differently on e-newspapers and e-books; while large-screen 
smartphones,  tablets  and  consumers  may  be  sufficient  and  practical  for  most 
consumers  of  e-newspapers  and  of  some  periodicals,  e-books  are  typically  read  on 
specialised e-readers, whose diffusion is currently substantially lower. Recent data is 
available for France, where only 28% of consumer buying e-books possess an e-book 
reader, but 87% of them possess a smartphone. However, a decline in prices for e-
books should spur an increase in ownership of e-readers, as consumers recoup more 
quickly  the  cost  of  the  device,  particularly  in  those  Member  States  where  VAT  on 
printed publications goes up, and there are recent indications that a certain share of 
users is not averse to reading on smartphones31.  

Respondents  to  the  open  public  consultation  believe  that  in  the  event  of  reduced 
prices for e-publications, consumers would buy roughly the same amount of printed 
books, but buy more e-books (46%) and some consumers would switch from printed 
to e-newspapers/e-periodicals (40%). 

Impact on the publishing industry 
According to the latest Eurostat publication32, publishing activities overall generated 
0.5% of the gross value added of the total economy in 2013 and the total share in the 
non-financial business economy was 1% in 2011. The 90 000 enterprises in 2011, of 
which  99%  are  SMEs,  employed  900 000  persons  and  around  60%  of  the  persons 
employed  in  the  publishing  industry  are  employed  by  the  SMEs.  The  number  of 
employees has slowly decreased over the last decade. 

When comparing the turnover of enterprises in the publishing sector, Eurostat reports 
a turnover of 28 billion euro for book publishing and a turnover of 73 billion euro for 
publishing newspapers and periodicals in 201133.  

31 
32 

33 

See Baromètre, cit. 
http://ec.europa.eu/eurostat/statistics-explained/index.php/Publishing_activities_statistics_-
_NACE_Rev._2 
More detailed Eurostat data on the turnover for each Member State for 2010 can be obtained from the 
study "Economic study on publications on all physical means of support and electronic publications in 
the 
webpage: 
Eurostat 
http://ec.europa.eu/eurostat/statistics-explained/index.php/Publishing_activities_statistics_-
_NACE_Rev._2. 

(2013)" 

directly 

context 

VAT 

from 

the 

or 

of 

26 

 
 
                                                            
However, the Eurostat data and the underlying classification (NACE Rev.2)  do not 
distinguish between printed or digital publications; only for e-books a general market 
share  is  communicated  by  the  Federation  of  European  Publishers.  Therefore,  no 
quantitative estimate of the impact of VAT rate  changes on the publishing industry 
can be made on the basis of official or administrative data34. 

Nevertheless,  the  qualitative  analysis  of  an  extension  of  reduced  rates  to 
electronically  supplied  publications  with  regard  to  Member  States'  budgets  suggest 
that net profit margins should increase by nearly 7 percentage points (given a VAT 
rate  differential  of  13.5  percentage  points)  equivalent  to  around  1  billion  euro  per 
year under the assumptions that the other 50% of the VAT decrease is passed on to 
the consumers by lower prices.35 As a consequence, not only the turnover of digital 
products  could  increase  as  a  price  effect,  but  there  could  as  well  be  limited 
substitution from print to digital. In particular the demand for paperbacks, which is 
more price sensitive, will see an increased competition  from e-books, whose prices 
are already now lower.36  

Impacts on individual businesses would depend on their product mix: those mainly 
selling  e-publications  would  clearly  benefit.  In  addition,  in  the  e-books  segment, 
there are some indications that a higher market share for e-publications could benefit 
micro-  and  small  enterprises,  as  these  can  be  efficiently  marketed  also  by  smaller 
businesses. Recent market estimates indicate that on Amazon, the major US retailer, 
the market share of at least some smaller-scale publishers ('indie' publishers, single-
author publishers) is on the increase, whereas the share of 'Big Five' publishers has 
been on a prolonged slump (see figure below).  

Figure 2 Trends in e-book market shares, sales on Amazon.com 

Source:  February  2016  Author  Earnings  report,  available  at  http://authorearnings.com/report/february-2016-
author-earnings-report/ 

34 

35 

36 

In  addition,  with  regard  to  newspapers,  the  Eurostat  data  also  include  advertising  newspapers,  which 
cannot benefit from a reduced VAT rate. 
VAT is a consumption tax and according to Article 78 of the VAT Directive the taxable amount shall 
include all taxes, duties, levies and charges, excluding the VAT itself, and all other incidental expenses 
charged by the supplier to the consumer.  
By  way  of  a  simple  illustrative  example  the  following  book  (“Harry  Potter  and  the  Prisoner  of 
Azkaban”)  shows  the  following  prices  differences  in  May  2016  on  www.amazon.fr  Softcover: 
EUR 6.55, Kindle format: EUR 5.79 (12% lower). 

27 

 
 
 
                                                            
In  the  newspapers  segment,  given  current  attempts  by  many  newspapers  to  move 
from a 'free  online' to a paid-subscription business model, it can be assumed that a 
lower  VAT  would  reduce  the  current  critical  pressures  on  profitability  and  help 
maintain  diversity  and  pluralism  in  the  sector37;  obviously  however  the  newspaper 
segment would suffer in the Member States with VAT rate increases.  

In  terms  of  jobs,  the  creation  of  new  opportunities  through  the  growing  of 
electronically supplied publications sector are expected to  be limited. Given that e-
publishing  requires  a  lower  minimum  efficient  scale  of  production,  this  could 
encourage an increase in the number of viable businesses in the publishing industry, 
with  positive  effects  for  diversity,  for  a  varied  cultural  offer,  and  presumably  for 
employment  in  the  creative  sector.  On  the  other  hand,  the  overall  decreased 
profitability will have  a negative impact on the industry that could result in  further 
job losses. The size of the expected decline in profitability cannot be quantified. 

The  impact  of  VAT  rate  changes  in  a  destination-based  VAT  system  on 
competitiveness  and  innovation  appear  negligible.  The  only  potential  impact  could 
derive from the assumption that the digital publishing sector is more vibrant than the 
traditional  publishing  sector,  which  might  spill  over  into  limited  gains  in 
competitiveness. 

Any additional costs that could emerge from the introduction of new VAT rates for 
e-publications  for  adapting  accounting  and  sales  software  are  explained  and 
discussed under the distinct criterion "simplicity of the VAT system".  

Impact on the printing industry and retail sector 

Despite  the  lag  in  the  availability  of  official  statistics,  the  Commission  services 
estimate that the printing industry in Europe generates a turnover of around 88 billion 
euro  from  printing  on  paper,  plastics,  or  textiles,  comprising  120 000  companies 
employing over 750 000 persons. 

The  shrinking  of  the  printing  sector  has  already  caused  job  losses  in  the  printing 
industry  itself  and  in  the  distribution  sector,  which  mainly  consists  of  very  small 
enterprises  (around  85%  of  them  employ  fewer  than  20  people)  and  there  is 
considerable  reform  ongoing  in  particular  in  respect  to  print  like  consolidating 
operations,  collaborating  and  outsourcing  that  put  pressure  on  SMEs.  Therefore,  a 
tax reduction would unlikely be a reason for further job losses and consumers might 
even  substitute  physical  by  electronic  publications  because  for  reasons  unrelated  to 
the  price  (i.e.  if  considered  as  easier  to  use).38  In  addition,  the  restructuring  in  the 
sector has rendered the printing industry in some way less dependent from printing 
on  paper.  Therefore  lower  rates  for  e-publications  would  not  have  any  significant 
impact  on  the  printing  industry  and  the  current  trend  is  supposed  to  continue  with 
further  job  losses,  which  can  however  not  be  quantified  in  the  absence  of  reliable 
time-series. There could only be a limited impact for the sector by lower VAT rates 
for  e-publications  in  case  substitution  of  printed  by  digital  publications  would  be 
motivated by price differences. However, both products  have different features and 

37 

38 

This is borne out by replies in the open public consultation. Respondents answered that, in the case of 
newspapers,  the  expected  increased  margins  would  not  only  lead  publishers  to  invest  in  new  content 
(42%), but also to be less dependent on advertising revenue (41%). 
In  general,  less  printing  on  paper  would  also  have  an  impact  on  the  paper  and  pulp  industry  and 
eventually, at the end of the chain, the forest industry. However, less printing of newspapers and books 
would in the first instance reduce the demand for recycled paper. 

28 

 
 
                                                            
the preferred choice of most consumers cannot be influenced by lower prices for e-
publications of 5 to 10%.    

As for the retail sector, it has faced significant pressures during the last decade due to 
the  increase  of  distance  sales  (e-commerce).  Online  bookshops  have  increased, 
whereas  brick-and-mortar  bookstores  have  had  to  adapt  their  business  models,  e.g. 
by  opening  cafes  and  offering  new  ideas  such  as  subscription  services  in  which 
readers  are  regularly  sent  books  to  suit  their  interests  and  tastes.  In  the  US,  the 
world's  most  advanced  market  for  e-books,  large  retailers  have  been  especially 
hardly hit: Barnes & Noble has closed hundreds of stores, while Borders went out of 
business in 2011. In the EU, the situation varies; in some Member States, fixed book 
increased 
prices  have  helped 
competition  by  consumers  buying  books  online.  In  Ireland  and  the  UK,  more  than 
one  quarter  of  independent  bookstores  have  closed,  but  their  number  has  remained 
fairly constant in France in the last decade39. A limited migration from print to digital 
would add further pressure on bookstores, but this development is already on-going 
and the major challenge for bookstores remains competition from e-commerce.  

independent  bookstore 

to  partially  resist 

the 

Nevertheless,  there  is  evidence  from  the  US  that  it  is  possible  for  bookstores  to 
successfully  meet  this  challenge.  Independent  bookstores  have  rebounded  strongly 
there:  data  published  by  the  American  Booksellers  Association  indicate  that  the 
number  of  member  stores  has  increased  by  27%  since  200940,  and  turnover  in  the 
first  half  2016  was  by  6.1%  on  the  previous  year41.  Given  uncertainties  on  how  to 
estimate  how  successful  these  adaptation  strategies  will  be,  this  impact  assessment 
does not contain any projection of the impact on the retail sector. When taking into 
account  online  sales,  which  are  more  and  more  offered  by  brick-and-mortar  stores 
and  the  possibility  of  extending  this  e-commerce  to  the  supply  of  e-publications, 
there should be only be a limited negative impact on these businesses by lower VAT 
rates for e-publications. The absence of reliable data for Europe on the retail sector 
does not allow any further quantitative assessment.   

The  open  public  consultation  also  did  not  seem  to  reveal  grave  concerns  about  the 
impact on printing industry as, despite the possibility of enhanced price competition 
with  e-books,  55%  of  the  respondents  indicated  that  there  should  be  no  negative 
impacts  for  the  industry.  Some  respondents  even  mentioned  that  traditional 
booksellers are increasingly present on the e-book market and that a VAT reduction 
together a simplified taxation of bundles could help booksellers to enhance their e-
book offer to final consumers. 

The printing industry itself provided 22 answers to the public consultations and the 
majority of these respondents do not see any impact on the printing industry in case 
of reduced prices for e-publications (68% with regard to e-newspapers/e-periodicals 
and 50% with regard to e-books) and only 18% expect a reduced demand for print. 
The  difference  among  sectors  might  be  due  to  already  high  penetration  of  digital 
publications in the newspaper market. 

39 
40 
41 

Assessing the Health of Independent Bookshops, by Stephen Heyman, New York Times, Feb. 25, 2015 
Heyman, op.cit. 
See  The  Death  of  the  bookstore  was  greatly  exaggerated,  by  Lev  Grossman,  TIME  Magazine,  July 
11/July 18 2016, and also American Booksellers Association, Retail Sales at Bookstores Up in June, by 
Sidney Jarrard, Aug 15, 2016. 

29 

 
 
 
                                                            
Environmental impact 

Electronically  supplied  publications,  just  like  any  digital  product,  might  be  seen  as 
ecological products since dematerialisation of publications saves from the production 
of  physical  support  (no  paper),  and  any  handling  and  distribution  (warehousing, 
shops, transport). However, from an environmental point of view, it is not that clear 
whether e-reading is really environmentally friendly. Indeed, production of electronic 
devices itself is energy-consuming, uses raw materials and eventually contributes to 
increasing electronic waste, which is harder to recycle than paper. Hence, one has to 
balance  the  ecological  benefits  from  producing,  transporting,  storing  and  disposing 
of  physical  publications  with  those  from  producing,  operating  and  disposing  of  e-
readers.  In  this  respect,  to  assess  the  ecological  footprint  it  is  useful  to  distinguish 
between e-books, which are typically read on dedicated readers, from e-newspapers, 
which  are  often  read  on  devices  that  the  consumer  would  most  likely  have  bought 
anyway (smartphones, computers, and tablets).  

E-books: 

Existing  research  has  highlighted  that  the  environmental  benefits  from  e-books 
depends  strongly  on  the  ecological  footprint  of  the  e-readers  themselves  and, 
crucially, on the number of physical books they offset. In 2010, Apple conducted an 
environmental report for its iPad tablet, which estimated total lifetime impact of 130 
kg  of  CO2,  58%  of  which  incurred  in  at  production,  11%  at  transport,  and  30%  in 
customer  use;  disposal  and  recycling  was  assessed  to  contribute  only  1%.  Newer 
dedicated  e-readers  using  e-ink  technology  undoubtedly  result  in  lower  operating 
energy  use,  as  the  approximately  3W  consumption  of  an  iPad  has  been  markedly 
improved  upon  in  subsequent  e-readers.  However,  for  the  Kindle,  a  Cleantech 
estimate  indicated  a  lifetime  carbon  footprint  of  168  kg  CO2,  similar  to  the  Apple 
estimate42. This compares to an estimate of only about 4 kg CO2 per average printed 
book. A rough calculation thus would suggest that an e-reader would start producing 
environmental benefits once it replaces 30 to 40 printed books. However, there are a 
number of uncertainties about the accuracy of carbon footprint calculations, as there 
could  be  an  underestimation  bias  by  producers.  A  recent  estimate  by  an 
environmental  group  concluded  that  at  1  to  30  printed  books  offset  per  e-reader, 
printed  books  have  a  lower  impact,  at  60  and  over,  e-readers  have  a  lower  impact, 
and between these extremes, the impact is uncertain.43 A trend towards greater use of 
multi-purpose devices blurs the picture further.  

Recent statistics on readership and use of electronic devices exist for the U.S. A Pew 
Research  Centre  for  2013  found  that  the  average  American  reads  12  books  per 
year44, which would imply that the average reader would have keep the same device 
for five years without replacing it, before starting to accrue an environmental benefit. 
However,  a  few  people  read  many  more  books  than  average,  as  highlighted  by  the 
difference between the median and the average number of books read annually (the 
median  being  only  5);  a  shift  to  e-reading  by  these  strong  users  is  obviously  more 
likely  to  be  environmentally  beneficial.  However,  only  28%  of  readers  read  11  or 
more  books  a  year,  compared  with  32%  of  Americans  that  own  an  e-reader, 
suggesting  that  many,  perhaps  most,  strong  readers  already  own  a  device45. 

42 
43 
44 
45 

New York Times, August 31, 2009. Are E-Readers Greener than Books? by Joe Hutsko,  
http://www.greenpressinitiative.org/documents/ebooks.pdf 
http://www.theatlantic.com/business/archive/2014/01/the-decline-of-the-american-book-lover/283222/ 
Pew Research Centre, op. cit, p 5. 

30 

 
 
                                                            
Moreover, most owners of e-readers also continue reading printed books; only 5% of 
respondents  reported  having  read  at  least  one  e-book  but  no  printed  books  in  the 
previous year.  

Obtaining  a  precise  estimate  of  the  books  actually  offset  is  complicated  because 
readers'  behaviour  may  change  as  a  result  of  using  the  reader;  they  might,  for 
example, purchase more e-books than they would purchase physical books.  

On the other hand, to the extent that a cut in the VAT rate on e-books would merely 
stimulate  the  replacement  of  printed  with  e-books,  without  boosting  the  sales  of  e-
readers,  the  environmental  impact  could  be  positive,  given  that  e-readers  use  little 
energy.  

Overall,  the  available  evidence  does  not  seem  to  indicate  any  sizeable  ecological 
benefit from e-books.  

E-newspapers, e-periodicals: 

The  situation  is  different  for  e-newspapers.  A  positive  environmental  impact  is 
generally assumed for e-newspapers because they are typically accessed on reading 
devices that consumers already possess, such as smartphones, tablets and computers. 
the 
Given 
environmental  impact  is  unambiguously  positive.  However,  the  Commission  is  not 
aware of any quantification of this impact.   

limited  energy  use  compared 

traditional  publications, 

their 

to 

Impact on the simplicity of the VAT system  

Allowing  for  a  reduced  rate  for  e-publications  lead  to  a  certain  increase  in 
complexity because the current rule, whereby all electronic services are taxed at the 
standard rate, is the simplest possible arrangement for rates.  

Large  businesses  active  in  many  countries  would  have  to  deal  with  an  increased 
number  of  VAT  rates  and  to  respect  possible  national  specifications  defining  in 
which  circumstances  a  reduced  rate  could  be  applied  to  e-publications.  For  small 
suppliers  engaged  on  the  domestic  market  only,  the  impact  on  compliance  costs 
would be limited.  

From the point of view of the EU cross-border supplier, given that it has to charge 
the VAT rate applied in the Member State where the customer resides, the costs of 
VAT  compliance  depend  on  how  clear  and  user-friendly  are  the  national  rules 
established by  the  Member  States. Currently,  determining the  applicable  rate  for  e-
publications is straightforward, as suppliers just need to look up the standard rate in 
the  country.46  Reduced  rates  for  e-publications  will,  however,  oblige  suppliers  to 
verify, if their services are eligible for a reduced rate in the country of the customer 
and  under  which  conditions  in  order  to  establish  the  correct  VAT  rate  in  each 
Member State, where their customers reside. Suppliers established in third countries 
that  electronically  supply  publications  to  EU  customers  will  also  have  to  comply 
with the VAT rules in each Member States. 

Whereas businesses already engaging in cross-border sales of physical books would 
have accounting and software solutions that allow for an adaptation to e-publications, 
businesses  when  wanting  to  start  engaging  in  selling  e-publications  cross-border 

46 

Businesses  have  already  now  to  determine  the  status  of  their  customer  (a  taxable  or  a  non-taxable 
person) and the place of supply (in which Member States of the EU or outside the EU) along with the 
standard VAT rate to be applied. 

31 

 
 
                                                            
would face additional costs for implementing such solutions. However, while selling 
physical goods still involves above a certain threshold (between 35.000 and 100.000 
euro  depending  on  the  Member  States)  registering  in  all  Member  States,  where 
customers  are  located,  suppliers  of  e-publications  can  since  2015  use  a  One-Stop 
Shop  (OSS)  and  continue  to  register  for  VAT  and  pay  VAT  in  only  one  Member 
State, which they can choose. This facilitates the market entry for smaller suppliers 
and  reduces  the  administrative  burden  by  95%  compared  to  a  registration  in  all 
Member  States.47  Any  additional  costs  for  software  are  a  general  requirement  in  a 
destination based VAT regime and are negligible in comparison to the reduction of 
administrative  costs  by  using  the  OSS.  In  addition,  businesses  have  a  degree  of 
flexibility about how to identify the location of their customers. They are not obliged 
to  use  IP-addresses  and  could  as  well  use  e.g.  the  IBAN  number  of  the  customers' 
bank accounts.  

This  conclusion  found  support  in  the  open  public  consultation.  A  large  majority  of 
businesses that answered to the open public consultation do not expect an increase in 
administrative burden and only very few respondents highlighted that the increased 
complexity  could  complicate  cross-border  sales  for  smaller  platforms  and  that  only 
big  companies  could  afford  software  solutions  automatically  locating  customer  and 
calculating VAT accordingly.  

On  the  other  hand  businesses  nearly  unanimously  highlighted  in  the  open  public 
consultation that aligning the rates for printed publications and e-publications would 
reduce administrative burden, because the taxation of bundles (a supply consisting of 
a  printed  book  together with  a  code  to  download  an  electronic  version of  the  same 
book  or  a  printed  newspaper  with  access  to  the  corresponding  e-newspaper)  would 
be simplified. The need to apply two different tax rates under a single bar code was 
seen  as  a  severe  obstacle  in  selling  bundles  due  to  the  need  for  specific  software 
solutions and thus in promoting e-publications. 

Whilst  such  claims  by  the  concerned  sector  are  justified  to  a  certain  extent,  it  is 
important to mention that the taxation of bundles falls under the sole responsibility of 
the Member States. The taxation of bundles is not regulated at EU level in the VAT 
Directive and therefore there are no rules that prohibit Member States from granting 
a reduced rate to certain bundles under the current VAT rates. However, if Member 
States  applied  a  reduced  rate  to  printed  publications  and  e-publications,  this  would 
indeed provide supplier with increased certainty in case of supplying bundles.48.  

With regard to the VAT Directive and the common system of VAT in the EU level, 
extending  reduced  rates  to  electronically  supplied  publications  will  complicate  the 
common  system.  By  breaking  the  simpler  current  principle  by  which  the  standard 
rate  is  applied  to  all  e-services,  Member  States  would  need  to  distinguish  
e-publications  from  other  e-services  and  would  at  least  need  to  exclude  from  the 
reduced VAT rate any books, newspapers or periodicals that predominantly consist 
of music and video content. The result, 28 national definitions, will add complexity 
to the VAT system and could trigger discussions on the national definitions in each 

47 

48 

This  overall  percentage  has  been  estimated  for  the  European  Commission  by  a  study  by  Deloitte  on 
modernising VAT for cross-border e-commerce, which has not yet been published.  
To  demonstrate  the  complexity  of  the  issue,  it  should  be borne  in  mind  that printed  publications  will 
continue  to  be  taxed  as  a  good  and  e-publications  will  continue  to  be  taxed  as  a  service  in  the  VAT 
Directive, independently from a change in the rules on VAT rates. That means that the place of taxation 
might not always the same for similar products and even when they are part of a bundle. 

32 

 
 
                                                            
Member States about extending the reduced rate treatment to all kinds of digital news 
services, other electronic services related to publishing or even internet providers.  

Third  countries  are  not  directly  affected  by  the  proposed  changes  to  the  VAT 
Directive, as the VAT Directive only applies to the EU territory, 

6.3. 

Option  2:  possibility  of  aligning  VAT  rates  for  publications  at  a  reduced  rate 
and at a super-reduced or zero rate 

Option  2 aims at allowing all Member  States to align  VAT rates for e-publications 
with the VAT rates currently applied to printed publications. In order to achieve this 
aim a provision of granting to Member States the possibility to apply super-reduced 
and  zero  rates  to  e-publications  has  to  be  introduced  in  the  VAT  Directive.  As  the 
provision  should  not  introduce  a  preferential  treatment  for  e-publications  over 
printed  publications  in  the  VAT  Directive,  the  provision  needs  to  cover  printed 
publications as well.  

Of  the  45%  of  the  respondents  of  the  open  public  consultation  that  voted  against 
abolishing super-reduced and zero rates, the large majority (90%) agreed to allow all 
Member States to apply super-reduced or zero rates to all publications. 

By introducing a general provision allowing Member States to apply super-reduced 
and  zero  rates  to  publications,  such  a  provision  would  replace  the  10  existing 
derogations  with  regard  to  super-reduced  and  zero  rates  for  printed  publications, 
which would need to expire once the definitive VAT regime enters into force. While 
it  cannot  be  known  whether  Member  States  would  use  this  freedom  to  lower  VAT 
rates  for  e-publications  and  possibly  printed  publications,  the  impact  assessment  is 
carried out under the assumptions that Member States would align the VAT rates for 
electronically supplied publications with the VAT rates currently in place for printed 
publications,  i.e.  26  Member  States  would  apply  a  reduced  VAT  rate  to  e-
publications  and  that  9  Member  States  would  in  addition  apply  super-reduced  and 
zero  rates  to  certain  e-publications.  Bulgaria  would  continue  to  apply  the  standard 
rate and Denmark would apply the standard rate to e-books and a zero rate to most 
newspapers and periodicals. 

It should be stressed, as done under option 1, that the impact of the measure would in 
fact be smaller. 

Budgetary impact on Member States 

VAT revenue on electronically supplied publications would decrease in all Member 
States  except  Bulgaria.  In  line  with  the  present  market  share  of  e-publications  the 
decrease  in  VAT  revenue  would  be  limited,  although  it  would  constantly  increase 
with an increasing market share of electronically supplied publications. 

The biggest impact would be expected for the UK, which has the biggest market for 
electronically  supplied  publications  in  the  EU  and  where  the  VAT  rates  for 
electronically  supplied  publications  would  be  lowered  from  20%  to  0%  for  most 
publications. 

According to the "Economic study on publications on all physical means of support 
and  electronic  publications  in  the  context  of  VAT  (2013)"  a  maximum  immediate 
decrease of 5%  in  VAT revenue  can be expected based on the fact that the market 
share of e-publications is less than 5% in all Member States except the UK, but the 
decrease could amount up to 15% in most Member States in the medium term by an 
increased market share of e-publications.  

33 

 
 
No  change  is  assumed  for  France  and  Italy  that  already  apply  reduced  or  super-
reduced rate to e-publications, as well as for Bulgaria and for Denmark with regard 
to books.   

Table 7 Budgetary impacts - Option 2 

Impact on VAT revenues49  

Books 

Newspapers, Periodicals 

Decrease of more  
than 15% 

BE, ES, HU, IE, PT, UK 

DK 

Decrease of maximum 
15% 

DE, EL, HR, CY, LU, MT, NL, AT, PL, 
RO, SI, SK, FI, SE 

HR, CY, LU, MT, RO, UK 

Decrease of maximum 
5% 

CZ, EE, LV, LT 

BE, CZ, DE, EE, IE, EL, ES, LV, LT, 
HU, NL, AT, PL, PT, SI, SK, FI, SE 

No impact 

BG, DK, FR, IT  

BG, FR, IT  

Source: Commission Services calculation based on the "Economic study on publications on all physical means of support and 
electronic publications in the context of VAT" 

There could be a VAT loss for all 28 Member States together of a maximum of 2.2 
billion euro per year in the medium term due to the introduction of reduced rates and 
a  further  decrease  in  VAT  revenues  would  occur  due  to  the  introduction  of  super-
reduced  and  zero  rates,  which  could  amount  to  2.5  billion  euro  per  year  in  the 
medium term. Overall, the total VAT loss with regard to e-publication could amount 
to 4.7 billion per year in the medium term, which represents 0.5% of the total VAT 
revenue in EU-28.  

Impact on consumers 

Assuming  an  overall  pass-on  of  50%  like  under  option  1,  consumers  could  benefit 
from  a  reduction  in  prices  for  e-publications  of  more  than  10%  on  an  average  in  
EU-28 amounting to around to 2.3 billion euro per year (half of the VAT cuts).  

An  expected  decline  in  prices  would  result  in  some  increase  in  sales  volumes  for  
electronically supplied publications in all Member States, because all Member States 
could  align  VAT  rates  for  e-publications  with  the  lower  VAT  rates  in  place  for 
printed  publications.  The  decrease  in  prices  for  electronically  supplied  publications 
would be higher than under option 1 and could encourage some more consumers to 
buy  these  e-publications,  but  again  depending  on  certain  other  aspects  as  outlined 
under option 1. 

Impact on the publishing industry 

By  extending  the  reduced,  super-reduced  and  zero  rates  to  electronically  supplied 
publications,  an  increase  in  the  profitability  of  digital  products  is  expected  and 
estimated at around 10% or around 2.3 billion euro annually (half of the VAT cut). 
The  increase  in  the  turnover  of  digital  products  would  also  be  influenced  by 
migration  from  print  to  digital  that  reduces  the  consumption  of  printed  books  and 
periodicals at the same time.  

49 

The impact on VAT revenues is expressed as percentage of VAT revenues accruing from each category 
(books,  newspapers  and  periodicals)  and  the  estimates  are  based  on  the  "Economic  study  on 
publications  on  all  physical  means  of  support  and  electronic  publications  in  the  context  of  VAT 
(2013)". 

34 

 
 
 
                                                            
According to the "Economic study on publications on all physical means of support 
and  electronic publications in  the context  of VAT (2013)" that assessed this option 
the total turnover of the publishing industry could slightly decrease by a maximum of 
5% across all Member States as the loss in sales from print in absolute terms would 
be  slightly  higher  than  the  gains  from  e-publications  in  absolute  terms.  These 
estimates therefore include the assumptions of a migration phenomenon from print to 
digital  that  reduces  the  consumption  of  printed  books  and  periodicals  at  the  same 
time. In particular demand for paperback books, which is more price sensitive, will 
see an increased competition from e-books whose prices are already slightly lower.50  

The  study  estimates  that  a  majority  of  Member  States  could  experience  a  decrease 
between 5% and 15% in the book market and between 1% and 5% in the newspaper 
and periodical market.  

The  benefit  of  increased  profits  for  the  publishing  industry  as  outlined  in  option  1 
apply  also  to  this  option  and  would  be  even  more  pronounced,  because  of  an  even 
higher increase of the profitability . 

Impact on the printing industry and retail sector 

The impact is identical to option 1.  

Environmental impact 

The impact is identical to option 1. 

Impact on the simplicity of the VAT system 

As  under  option  1  there  is  a  negative  impact  deriving  from  the  departure  from  the 
principle of standard rate treatment for all electronic services.  

The main challenge with regard to options 2 lies in the fact that option 2 introduces 
the  possibility  to  apply  new  super-reduced  and  zero  rates  to  e-publications.  If 
Member States decide to introduce zero rates for e-publications but fail to introduce 
clear  provisions  in  their  national  legislation  to  exclude  predominant  audio-visual 
content from the scope of these rates, the partial supply of zero rated internet content 
could  be  established  and  the  complexity  of  taxing  the  digital  economy  would 
increase.  

Allowing  Member  States  more  freedom  in  setting  VAT  rates,  in  particular  super-
reduced and zero rates, is a political choice to give preference to subsidiarity over the 
possible risk of adding complexity to the VAT system.  

In this regard also option 2 is also a temporary solution, because the list of goods and 
services  eligible  for  super-reduced  and  zero  rates  would  for  the  moment  only 
encompass publications. Whereas the list of goods and services eligible for reduced 
rates  has  been  established  during  two  decades  of  discussions  in  the  Council,  this 
constitutes  a  temporary  unequal treatment  of  goods  and  services  before  the  general 
VAT rate proposal in 2017, which would involve discussions regarding which goods 
and  services  such  a  treatment  should  be  allowed  and  a  general  discussion  on  the 
scope of such a list.   

50 

By  way  of  a  simple  illustrative  example  the  following  book  (“Harry  Potter  and  the  Prisoner  of 
Azkaban”)  shows  the  following  prices  differences  in  May  2016  on  www.amazon.fr  Softcover: 
EUR 6.55, Kindle format: EUR 5.79 (12% lower). 

35 

 
 
                                                            
7. 

HOW DO THE OPTIONS COMPARE? 

7.1. 

Objectives 

Option 1 does not fully achieve the specific objective of allowing all Member States 
to  align  the  rates  for  e-publications  with  the  rates  they  currently  apply  to  printed 
publications, as only 19 Member States could do so.  

Option 2 fulfils the specific objective and allows all 28 Member States to align their 
VAT rates for printed publications and e-publications at the rates currently in place.  

7.2. 

Impacts 

Apart  from  budgetary  impacts,  no  option  has  significant  economy-wide  impacts 
beyond  the  publishing  and  printing/distribution  sector  (and  their  customers).  The 
impacts  are  limited  to  publishing  activities  that  generated  0.5%  of  the  gross  value 
added  of  the  total  business  economy  (around  1%  of  the  non-financial  business 
economy) in 2013 and which even include advertising newspapers, which either free 
of charge or taxed at the standard rate now and under both options. 

It is impossible to estimate the impact of a change in the VAT Directive with regard 
to VAT rates without making assumptions on whether Member States would change 
the current VAT rates in place. The VAT Directive does not impose any VAT rates. 
The VAT Directive only determines minimum rates and limits the application of any 
reduced  rates  in  order  to  harmonise  the  common  system  of  VAT  in  the  European 
Union,  which  is  essential  for  an  origin  based  definitive  VAT  regime  as  it  was 
initially  foreseen.  Given  that  it  is  the  Member  States'  responsibility  to  determine 
VAT  rates,  it  is  not  sure  how  many  and  which  Member  States  will  implement  any 
rate cuts. Thus, for the purpose of this Impact Assessment the technical assumption 
that all Member States except Bulgaria will lower VAT rates constitutes a maximum 
impact scenario.  

When comparing the two options, the only difference lies in the possibility to apply 
super-reduced  and  zero  rates  to  publications  under  option  2.  As  stated  before,  the 
general  VAT  proposal  in  2017  would  include  such  a  possibility  and  option  2  is 
therefore  more  in  line  with  the  Actions  Plan  on  VAT.  However,  the  adoption  of  a 
general VAT rate proposal will take time and option 2 would introduce a temporary 
unequal treatment between publications and all other goods and services (including 
food), for which there is no general super-reduced and zero rate available.      

With regard to revenue erosion it should be noted that Member States have until now 
been protected by certain restrictions for Member States in setting VAT rates. This 
would  be  less  the  case  in  a  definitive  VAT  regime  granting  Member  States  more 
freedom  in  setting  VAT  rates.  Member  States  would  take  more  responsibility  to 
determine  the  VAT  revenue  that  should  be  generated.  Member  States  are  surely 
aware that VAT subsidies in  form  of lower VAT rates can hardly  be designed in a 
revenue neutral way. In case consumers bought more publications because of lower 
VAT rates, such VAT revenue could well be increased, but at the same time, more 
VAT at mostly the standard rate can be deducted by the suppliers for their inputs. So, 
the  more  products  are  taxed  at  a  reduced  or  super-reduced  VAT,  the  more  VAT  at 
the  standard  rate  is  deducted  and  this  has  the  tendency  to  decrease  VAT  revenues 
even further. 

36 

 
 
 
 
Budgetary impact vs. baseline 

Under  the  baseline  scenario  VAT  revenues  would  need  to  increase  for  France  and 
Italy.  Under  option  1,  most  Member  States  would  see  a  small  decrease  in  VAT 
revenues, because they can apply reduced VAT rates to e-publications. Under option 
2 VAT revenues could further decrease because of the applications of super-reduced 
and zero VAT rates for e-publications.  

Baseline scenario: positive impact (+ 1 billion euro per year) 

Option 1: negative impact (- 3 billion euro per year compared to baseline) 

Option 2: negative impact (- 5.7 billion euro per year compared to baseline) 

Consumers 

Not taking into the account the impact on consumers in France and Italy under option 
1, consumers will benefit from reduced prices for e-publications, which are estimated 
to amount to half of any VAT cuts 

Option 1: positive impact (++) 

Option 2: positive impact (++) 

Publishing industry 

Under each option the publishing industry would benefit from the fact that all of their 
supplies could benefit from a VAT reduced rate. Compared to the baseline scenario 
an overall increase in profitability amounting to half of any VAT cuts is assumed for 
both options.  

Option 1: positive impact (++) 

Option 2: positive impact (++) 

Looking at SMEs in the publishing industry, the impact assessment has shown that 
with  regard  to  digital  book  publishing  SMEs  already  now  benefit  from  simplified 
market access and from the fact that e-publishing requires a lower minimum efficient 
scale of production. 

Option 1: positive impact (++) 

Option 2: positive impact (++) 

Printing and retail sector 

Under each option, the printing industry would be challenged by lower VAT rates for 
e-publications and a potential substitution of printed publications by e-publications.  

Option 1: limited negative impact (-) 

Option 2: limited negative impact (-) 

Environmental impact 

The environmental impact of all options mirrors somewhat the impacts with regard 
to  the  printing  industry.  In  particular  a  substitution  of  printed  newspapers  by 
electronically supplied newspapers has a positive environmental impact, whereas the 
environmental impact with regard to e-books depends on the future ability of readers 
to use multi-purpose devices.  

Option 1: positive impact (++) 

37 

 
 
 
Option 2: positive impact (++) 

Simplicity of VAT system  

Both options allow Member States to align the VAT rates for all publications at the 
level  of  reduced  rates  and  provide  suppliers  with  legal  certainty  when  supplying 
bundles, but break with a simple and clear rule to tax all e-services at a standard rate. 
This  would  complicate  the  rules  in  comparison  to  the  baseline  scenario  and  has  a 
negative impact in both options. However, under option 2 the VAT system is further 
complicated  by  the  introduction  of  a  general  provision  allowing  Member  States  to 
apply super-reduced and zero rates, which do for the moment not exist for the supply 
of any other goods or services. 

Option 1: limited negative impact (-) 

Option 2: negative impact (--) 

Overall assessment (objectives and impacts)    

Effectiveness: 

Option  1  only  allows  19  Member  States  to  align  the  VAT  rates  for  e-publications 
with  the  current  VAT  rates  for  printed  publications  and  option  2  allows  all  28 
Member States to align VAT rates for e-publications with the current VAT rates for 
printed publications.  

Coherence: 

Both options are coherent with the subsidiarity approach outlined in the Action Plan 
on  VAT,  providing  Member  States  with  more  flexibility  in  setting  VAT  rates  in  a 
destination based VAT regime.  Option 1 establishes a more limited solution, which 
could  be  reinforced  later  upon  entry  into  force  of  a  more  general  rates  proposal, 
while  option 2 aims  at  providing  already now full  freedom  in  setting VAT rates in 
one  specific  area.  Given  the  unanimity  principle  in  taxation  matter  option  2  would 
test  the  waters  ahead  of  the  introduction  of  a  general  reform  and  would  stimulate 
reflection in the Council on how derogations (super-reduced and zero rates) that need 
to expire in a definitive VAT regime should be replaced by general provisions for all 
Member States.  

Efficiency: 

The  impacts  of  the  options  depend  solely  on  Member  States'  decisions.  Member 
States  could  always  apply  a  standard  VAT  rate  to  the  supply  of  all  goods  and 
services, but they have a long tradition of granting VAT subsidies to certain sectors 
for  the  benefit  of  the  final  consumer.  Under  the  assumptions  made  in  this  Impact 
Assessment  report  the  impacts  of  option  1  are  more  positive  than  for  option  2 
because of the budgetary impact and the impact on the simplicity of the VAT system. 
Nevertheless, these impacts are the direct effect of a political choice to give Member 
States full (or at least more) flexibility and responsibility in setting VAT rates, which 
is foreseen for the definitive VAT regime as announced in the VAT Action Plan. 

In line with the subsidiarity principle, this impact assessment prioritizes freedom of 
choice for Member States, as these will at any rate retain a full ability to safeguard 
revenue by not lowering the VAT rate on e-publications, and thus can control to what 
extent the budgetary cost is proportionate to the objective. To assess whether revenue 

38 

 
 
 
or  other  considerations  should  prevail,  is  at the  end  of  the  day  up  to  each  Member 
State. As a result, both options are preferred over the baseline scenario.   

Both options constitute a political choice to respond to the urgent request expressed 
by  many  Member  States  to  be  enabled  to  align  VAT  rates  for  all  types  of 
publications.  They  only  differ  by  the  extent  by  which  flexibility  is  granted.  In 
comparison to option 1, option 2 fully achieves the objective of rate alignment in all 
Member  States,  while  advancing  further  on  granting  full  rate  flexibility  for  the 
supply of a specific product (publications), ahead of a general VAT rate proposal. 

Option 1: limited positive impact (+) 

Option 2: limited positive impact (+) 

39 

 
 
 
 
Figure 3: Comparison of options with objectives and impacts 

OPTIONS 

Baseline scenario 

TIMELY CHANGES TO THE RULES ON 
VAT RATES 

Option 1  

Option 2  

Reduced rate for all 
publications  

Reduced, super-
reduced and zero 
rates for all 
publications  

OBJECTIVE 
ADRESSED   

Allow Member States 
to align VAT rates for 
publications 

IMPACTS 

Budgetary impact 

Consumers 

Publishing industry  

(SMEs) 

Printing and retail 
sector 

Environmental impact 

Simplicity of VAT 
system 

OVERALL 
ASSESSMENT 
(objective and impacts) 

No 

Partly 

Fully 

(19 Member States) 

(28 Member States) 

+ 1 billion euro 
annually 

Up to - 3 billion 
euro annually 

Up to - 5.7 billion 
euro annually 

051 

052 

(0) 

0 

0 

0 

0 

++ 

++ 

(++) 

- 

++ 

- 

+ 

++ 

++ 

(++) 

- 

++ 

-- 

+ 

0 : zero or negligible impact, 

+ / - : limited positive / negative impact, 

++ / -- : positive / negative impact, 

+++/ --- : significant positive / negative impact 

51 
52 

The impact would be negative in Italy and France. 
The impact would be negative in Italy and France. 

40 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                            
7.3. 

Preferred option 

Option 1 and 2 are preferred over the baseline scenario, because they fulfil (at least 
partially) the specific objective of this  targeted initiative. From a technical  point of 
view there is no clear preferred option, but option 2 has the advantage that it is fully 
in line with what the Commission communicated in its Action Plan on VAT, namely 
that  derogations  (super-reduced  and  zero  rates)  only  available  to  a  few  Member 
States should be granted to all Member States in a definitive VAT regime.  

Setting VAT rates falls under the sole responsibility of Member States and thus, once 
such rules are adopted, Member States will not be obliged to change the rates they 
currently apply and in particular, Member States will not be obliged to align the VAT 
rates  for  printed  publications  and  e-publications.  They  can  continue  to  apply  a 
standard rate to electronically supplied publications and continue to apply lower rates 
for printed publications.  

All impacts depend on the assumption that Member States would align VAT rates as 
far as the VAT Directive would allow them. The impacts shown therefore illustrate a 
maximum impact; Member States would be able to modulate the impacts by acting 
on the rate level.  

Granting Member States freedom in setting VAT rates by allowing the application of 
reduced,  super-reduced  and  zero  rates  for  publications  does  not  entail  any  risk  of 
creating distortion of competition or poses a problem for the functioning of the single 
market.  

Eventually, Member States have to make a choice between raising VAT revenue or 
lower (up to zero) VAT for certain products. Member States do this already now, but 
under less flexibility. More flexibility also implies that Member States will have to 
deal  with  increased  pressure  from  lobby  for  extending  reduced  VAT  rates  in  a 
definitive VAT regime that is currently be dealt with at the EU level. 

41 

 
 
 
8. 

MONITORING 

Monitoring is required with regard to the correct application of the VAT Directive. 

If  a  Member  State  decides  to  apply  other  rates  than  the  standard  rate  to  
e-publications, it would need to introduce national provisions that specify the general 
provisions at the EU level, i.e. this Member State would need to define what is an "e-
book", what is an "e-newspaper" and/or what is an "e-periodical". These definitions 
fall  under  Member  States'  responsibility,  but  Member  States  are  not  allowed  to 
extend  the  scope  of  application  of  reduced,  super-reduced  or  zero  rates  to  other 
goods  and  services  than  books,  newspapers  and  periodicals.  Furthermore,  Member 
States would be obliged to tax publications that predominantly consist of music and 
video  content  at  the  standard  VAT  rate.  Consequently,  national  provisions  will  be 
monitored as part of the continuous monitoring of the correct application of the VAT 
Directive.  

Beyond  that,  the  monitoring  at  EU  level  takes  place  in  a  continuous  review  of  the 
scope  of  the  reduced  rate  in  line  with  Article  100  of  the  VAT  Directive.  To  this 
extent,  there  is  also  a  continuous  collection  of  information  about  the  VAT  rates  in 
place  in  each  Member  State.  Such  information  is  currently  published  by  the 
Commission  in  the  document  "VAT  rates  applied  in  the  Member  States  of  the 
European  Union"53,  which  primarily  serves  as  an  information  tool  for  researchers, 
businesses  and  final  consumers.  In  future,  with  the  implementation  of  a  definitive 
VAT regime, such information should be collected on a mandatory and standardised 
basis.  A  web  portal  could  provide  accurate,  timely  and  binding  information  on  the 
reduced  VAT  rates  in  place  in  each  Member  States.  A  list  and  definitions  of  the 
products  that  are  not  covered  by  the  standard  rate  in  each  Member  State  could  be 
included in the web portal and regularly updated by the Member States. 

As  VAT  rate  setting  falls  under  the  Member  States  responsibility  and  does  not 
influence the own resource payments and therefore EU budget, the Commission does 
not  monitor  VAT  revenues  in  the  Member  States  with  regard  to  specific  products. 
This  is  also  not  possible  for  Member  States,  because  VAT  rates  payments  by 
suppliers  might  be  encoded  with  regard  to  the  VAT  rate  they  relate  to,  but  they 
cannot  be  linked  to  a  specific  product,  which  would  be  the  condition  allowing  for 
such monitoring.       

53 

https://ec.europa.eu/taxation_customs/sites/taxation/files/docs/body/vat_rates_en.pdf 

42 

 
 
 
                                                            
9. 

ANNEXES  

9.1. 

Procedural information  

1. Agenda planning and Work Programme References 

The Agenda Planning Reference is 2016/TAXUD/005. 

2. Inter-Service Steering Group 

An Inter-Service Steering Group was set up for the follow-up of the Action Plan on 
VAT. The Steering Group  met on four occasions, on 8 June, 5 July,  20 July  and 1 
September 2016 to discuss VAT for e-publications. An additional meeting was held 
on 24 October 2016 to discuss a revised version of the Impact Assessment following 
integration  of  comments  from  the  Regulatory  Scrutiny  Board.  The  following 
directorates  and  services  were  consulted:  DG  Agriculture  and  Rural  Development, 
DG  Budget,  DG  Communications  Networks,  Content  and  Technology,  DG 
Competition,  DG  Economic  and  Financial  Affairs,  DG  Education  and  Culture,  DG 
Environment, DG Internal Market, Industry, Entrepreneurship and SMEs, DG Justice 
and  Consumers,  the  Secretariat-General  and  the  Legal  Service.  The  feedback 
received from these directorates and services was taken into account in the report and 
the first draft by DG TAXUD was substantially amended during the process.  

3. Consultation of the Regulatory Scrutiny Board 

The Impact Assessment Report was submitted to the Regulatory Scrutiny Board for a 
first time on 14 September 2016 and resubmitted on 26 October 2016.  

On  11  November,  the  Regulatory  Scrutiny  Board  gave  a  positive  opinion  with 
reservations.  The  report  was  further  adjusted  in  order  to  integrate  the  Board's 
recommendations.  

Board recommendation 

What has been done? 

Where? 

1.  

present 

The  report  should  clarify  how 
is 
the 
articulated 
the 
Commission's  approach  to  the 
definitive VAT regime. 

initiative 
with 

2.  

report 

should 

The 
further 
elaborate the baseline scenario 
to  include  those  elements  of 
the definitive VAT regime that 
have  already  been  agreed  and 
those  that  remain  uncertain  at 
this stage.  

Section 5.3 

It  is  explained  that  the  Action  Plan 
puts  forward  two  options  for  the 
rules  on  VAT  rates  in  a  definitive 
VAT  regime,  which  both  would 
make available to all Member States 
the  derogations  (super-reduced  and 
zero  VAT  rates)  currently  available 
to only a few Member States. 

It  is  explained  that  the  foreseen 
the  definitive  VAT 
elements  of 
the 
impact  on 
regime  have  no 
baseline scenario. 

Section 5.1 

43 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
It  should  revise  the  general 
objective of the initiative.  

The general objective of the initiative 
has  been  revised  and  complemented 
by a second general objective. 

Sections 
4.1 and 4.2 

3.  

The  report  should  clarify  the 
the  options  and 
scope  of 
assumptions behind the impact 
analysis and  

It is emphasised that the impacts are 
impacts  based  on  a 
maximum 
technical, 
realistic, 
assumption  that  all  Member  States 
would 
lower  VAT  rates  for  e-
publications as far as they could.   

not 

but 

Sections 
6.2 and 6.3 

compare the options in a more 
transparent and balanced way. 

The technical analysis does no longer 
identify a preferred option. 

Sections 
7.2 and 7.3 

recommendations 
the 

improvements  by 

Further 
for 
Board: 

What has been done? 

Where? 

The  planned  VAT  reform  is 
not fully reflected in the report 

The  options  outlined  in  the  Action 
Plan were explained. 

Section 5.3  

Naming  the  options  should  be 
consistent  across  sections  5 
and 6 

Names  of  the  options  in  section  6 
have been replaced with the names of 
options in section 5. 

Sections 
6.2 and 6.3 

Descriptions  of  option  1 
should be clearer 

state 

clearly 

The  impact  analysis  section 
should 
the 
assumption  that  all  Member 
the 
States  will  exercise 
maximum  extent  all  leeway 
that  the  options  provide,  i.e. 
they  will  lower  VAT  rates  to 
the fullest possible extent. 

to 

on 

to  be 

There  appears 
little 
evidence  to  corroborate  that  a 
reduced 
e-
VAT 
publications will lead to lower 
for  consumers.  The 
prices 
contradictory 
shows 
report 
the 
outcomes 
and 
Commission's 

between 
study 

It  has  been  emphasised  that  that 
option  1  retains  the  existing  leeway 
for  super-reduced  and  zero-rates  for 
some  publications  in  some  Member 
States.   

Section 5.2 

Such a statement has been introduced 
for both options.  

Sections 
6.2 and 6.3 

Section 6.2 

The reference to past experience has 
the  discussion 
been  deleted  and 
enirely refers to economic theory that 
suggests  that  high  price  elasticities 
are an evidence for lower prices as a 
result  of  at  least  a  partial  pass  on  of 
the VAT cut to final consumers. 

44 

 
 
 
 
 
 
 
 
 
practice  and  past  experience. 
The  report  should  therefore 
the 
explain  why 
it  bases 
impact  assessment,  and 
in 
particular  the  options,  on  this 
assumption. 

45). 

report 

across 

should 

not 
The 
aggregate 
all 
respondents  (e.g.  pages  23,  33 
and 
Documented 
differences  across  groups  of 
stakeholders 
the 
blanket statements on pages 45 
and  46  that  responses  do  not 
across 
significantly 
differ 
groups of respondents. 

contradict 

On  page  23  differences  across 
different groups of stakeholders have 
been added.  

Sections 
6.2 and 9.2 

On  page  33  is  has  been  made  clear 
that only businesses are referred to.  

The  blanket  statement  on  page  45 
and 46 has been corrected. 

9.2. 

Stakeholder consultation  

The consultation strategy, besides verifying the results of recent public consultations 
in  2008,  2011  and  2013  on  VAT  rates  and  in  particular  e-books,  had  two  main 
purposes.  The  first  was  to  get  the  views  of  stakeholders  on  the  Commission’s 
commitment  to  allow  Member  States  the  application  of  reduced  VAT  rates  for  e-
publications, and the second was to provide them with an opportunity to present their 
views on the most appropriate definition(s) for e-publications.  

Therefore,  an  open  public  consultation  for  the  initiative  was  held  for  8  weeks 
between  25  July  and  19  September  201654  using  the  EU  Survey  tool;  in  the  rare 
cases, where respondents wished to provide a filled in questionnaire by email rather 
than in the EU Survey tool, the answers were introduced in the system on behalf of 
the respondents. The consultation  period  had to be shortened in  order to be able to 
present  a  proposal  before  the  end  of  2016  in  accordance  with  the  Action  Plan  on 
VAT. Due to this short time frame and to technical difficulties, the questionnaire was 
only provided in English, but upon request respondents were informed that answers 
to the few open questions included in the consultation could be given in any of the 24 
official  languages  in  the  EU.  The  Commission  received  858  submissions  via  EU 
Survey  and four other contributions by email. All  public submissions will be made 
available on the DG TAXUD website in October 2016.  

Although Member States already reacted in the Council in May 2016 to the Action 
Plan  on  VAT  and  invited  the  Commission  to  present  a  proposal  on  e-publications, 
the Belgian Federal Public Service of Finance, the Slovenian Ministry of Culture, the 
HM  Treasury  of  the  United  Kingdom,  the  Spanish  tax  authorities  and  the  Swedish 
government reacted again to the open public consultation and expressed support for 
such  a  Commission  initiative.  Other  Member  States  have  also  reiterated  their 
support, mainly in bilateral meeting with members of the European Commission. 

54 

https://ec.europa.eu/taxation_customs/consultations-get-involved/tax-consultations/public-consultation-
on-reduced-vat_en 

45 

 
 
  
                                                            
A large majority of respondents were readers, but with 251 responses also business 
and organisations participated largely in the consultation together with 107 authors. 
Nearly  all  respondents  indicated  under  'other'  were  libraries,  for  which  no  specific 
category had been foreseen.  

Profile of respondents Open Public Consultation 
Author 
Company/enterprise 
Organisation, association, consultancy, law firm 
Member State or other Public authority  
Researcher, academic institution, think tank 
Reader 
Other 

12% 
16% 
14% 
1% 
4% 
50% 
4% 

The main field of economic activity of the participating businesses and organisation 
were publishing of books, newspapers, periodicals, music or video recordings (56%).  

There is evidence of a campaign due to a large number of replies from Poland (28%), 
mainly in the 'readers' category. However, these responses have no material impact 
on the results and  therefore all  contributions  have been  included in  the analysis.  In 
terms of the participation from other countries, a significant 19% indicated that the 
respondent was based in the UK and 15% in France. 

The  consultation  also  included  an  open  question  at  the  end  of  each  section.  These 
questions  gave  respondents  an  opportunity  to  elaborate  on  their  replies.  Mainly 
businesses and organisations elaborated on their responses and pointed out the need 
to  enable  Member  States  to  apply  the  same  reduced  VAT  rates  to  printed 
publications and e-publications. 

The title of the open consultation was "Public Consultation on reduced VAT rates for 
electronically supplied publications". The consultation did not aim at discussing the 
current treatment of printed publications or publications on other means of physical 
support. It was therefore appropriate to carry out an online consultation.  

Overview of consultation results 

It is important to note that the responses differ slightly between the different groups 
of respondents. If all answers are aggregated, the key findings are: 

  94% of the respondents agreed that Member States should be allowed to apply a 

reduced VAT rate to e-books. 

  88% of the respondents agreed that Member States should be allowed to apply a 

reduced VAT rate to e-newspapers and e-periodicals, too. 

  A  plurality  of  respondents  (45%)  found  that  super-reduced  and  zero  rates  for 
printed publications should not be abolished. Out of these 45%, an overwhelming 
majority  (90%)  was  in  favour  of  allowing  all  Member  States  to  apply  super-
reduced or zero VAT rates to printed publications and e-publications. 

The  results  of  this  open  public  consultation  are  in  no  way  representative,  because 
participation was made  on a voluntary basis and for specific groups of respondents 
the number of responses was simply too low. In addition, asking consumers and in 
particular  readers  about  a  potential  tax  cut  by  Member  States,  triggers  positive 
answered towards a tax cut. However, the answers relating to existing super-reduced 
and  zero  rates  show  that  respondents  are  well  aware  of  a  situation  where  tax  cuts 
might go too far.  

46 

 
 
Open public consultations also give a good picture about the interest of stakeholders 
in  a  specific  issue  and  the  overall  high  amount  of  responses  in  a  very  limited  time 
frame shows great interest by readers and the publishing industry in this subject. It is 
important to carve out the nuances of differences in responses to the closed questions 
as  far  as  possible,  in  order  to  value  the  results  of  this  open  public  consultation. 
Otherwise, it can only be concluded from this public consultations that readers have 
already been influenced by several campaigns advocating for reduced VAT rates for 
e-books,  because  obviously  most  respondents  were  motivated  to  reply  to  this 
consultation  because  of  books  and  when  being  asked  about  newspapers  they  were 
slightly less in favour of allowing reduced VAT rates.  

Therefore, stakeholders were asked about the effects they expected from a reduction 
of  VAT  rates  in  two  distinct  sections  (one  on  books  and  one  on  newspapers  and 
periodicals).  According  to  the  stakeholders,  the  predominant  effects  would  be  the 
following:   

  For e-books, prices go down, either by the amount the VAT is reduced (45%) or 

less than the amount the VAT is reduced (39%). 

 

  For  e-newspapers  and  e-periodicals  prices  go  down,  either  by  less  than  the 
amount the VAT is reduced (42%) or by the amount the VAT is reduced (32%). 
If  the  VAT cuts are  not  fully  passed  on to  final  consumers,  profit  margins  for 
publishers would increase; the sector would, in the case of books, invest in new 
content  (47%)  and,  in  the  case  of  newspapers,  not  only  invest  in  new  content 
(42%), but also be less dependent on advertising revenue (41%). 
In  case  prices  for  e-publications  fall,  consumers  would  buy  roughly  the  same 
amount  of  printed  books,  but  buy  more  e-books  (46%)  and  some  consumers 
would switch from printed to e-newspapers/e-periodicals (40%). 

 

  No  impact  of  reduced  prices  for  e-books  is  assumed  by  the  majority  of 
stakeholders  (55%)  for  the  printing  industry,  the  pulp  and  paper  industry,  and 
bookstores.  With  regard  to  newspapers  stakeholders  were  more  divided:  37% 
assume a reduced demand for print and reduced number of newspaper stores and 
equally 37% assume no impact. 

These  answers  show  that  respondents  even  though  the  large  majority  of  them 
advocates  for  a  reduction  in  VAT  rates  for  e-publications  are  well  aware  that  a 
reduction in VAT will not automatically passed on to final consumers.  

When asked about the definition of the terms book, newspaper and periodical at EU 
level, the majority (59%) of respondents indicated that there is no need to define the 
terms in a uniform way at EU level. Even when respondents replied that there was a 
need to define the terms in a uniform way at EU level, they often argued differently 
in  their  comments.  Some  respondents  tried  to  elaborate  on  this  complex  issue  and 
concluded that there was even no need in some Member States to define further the 
terms  book,  newspaper  or  periodical  in  their  national  law.  One  respondent 
summarised  the  situation,  recalling  the  diverging  definitions  in  several  Member 
States,  and  concluded  that  the  International  Standard  Book  Number  (ISBN)  could 
qualify as  a criterion for books; however,  this respondent also  noted that the ISBN 
encompasses a range of educational materials, some of which may not be regarded as 
books, such as videos and films. 

In two final sections, businesses were asked about the inclusion of audio and video 
material in e-publications:  

47 

 
 
  25%  of  the  businesses  already  now  sell  e-books  with  audio  and  video  content 
alongside text, 52% do not offer it but think that the market may soon demand it 
and  only  23%  do  not  envisage,  in  the  foreseeable  future,  selling  e-books  with 
audio and video content alongside text. 

  39% already offer now paid services including audio and video content alongside 
text, 41% do not offer it but think that the market may soon demand it and only 
20% do not envisage, in the foreseeable future, offering paid services including 
audio and video content alongside text. 

In  the  same  section  businesses  were  subsequently  asked  if  the  introduction  of 
reduced  VAT  rates  for  e-books  would  increase  the  administrative  burden  for  their 
business. A 12% share of the businesses see such an increase with regard to e-books 
and 6% with regard to e-newspapers and e-periodicals. However, the large majority 
(around 68%) of the businesses do not expect an increase in administrative burden. 
In  this  regard,  those  businesses  that commented  further  nearly  unanimously  argued 
that they would face a lesser administrative burden with regard to bundle sales, and 
some mentioned the challenge of complying with diverging VAT rates, particularly 
for smaller businesses.  

Observations relating to specific groups of respondents  

As  previously  mentioned,  answers  to  the  consultations  do  not  differ  significantly 
between the different groups of respondents. Most importantly, the overall sample of 
the consultation is not representative and this is in particular true for partial samples. 
Hence, differences between groups have to be interpreted carefully. 

A small difference can be observed with regard to the support for a reduced rate for 
e-books,  which  was  the  highest  among  readers  (97%),  researchers  (98%)  and 
libraries  (100%),  whereas  a  lower  level  support  was  found  in  the  printing  industry 
(73%)  and,  surprisingly,  the  publishing  industry  (still  however  overwhelming  at 
83%). This less-than-unanimous support among publishers might perhaps result from 
entries  of  businesses  whose  main  focus  is  on  the  traditional  printed  medium. 
However,  with  regard  to  e-newspapers  and  e-periodicals  the  support  was  between 
88% and 90% among all groups.  

As previously mentioned, readers are mainly located in Poland (53%). On the other 
hand, the large majority of authors are located in the United Kingdom (81%), in line 
with the greater development of the e-book sector there. Researchers participating in 
the survey come mainly from Italy, Spain and the Netherlands.  

The  respondents  from  the  publishing  industry  indicate  mostly  France  (21%), 
Germany  (17%)  and  the  United  Kingdom  (17%)  as  their  location.  The  biggest 
difference  in  their  answer  to  the  other  respondents  relates  to  a  possible  EU  level 
definition  of  books,  newspapers  or  periodicals.  Compared  to  an  average  of  59%  of 
respondents, 80% of the publishing industry respondents indicate that no specific EU 
level definition was required. A second difference is that 60% (with regard to books) 
and  62%  (with  regard  to  newspapers/periodicals)  of  these  respondents  declare  that 
their sector would invest in new content, in case profit margins for publishers would 
increase.  This  is  considerably  higher  than  what  the  average  of  all  respondent  (47% 
with regard to books and 42% with regard to newspapers/periodicals) believes.  

From the 22 answers from the printing industry 27% came from Germany and 23% 
from the United Kingdom. The most remarkable observation about this group relates 
to  the  fact  that  the  majority  of  these  respondents  do  not  see  any  impact  on  the 

48 

 
 
printing industry in case of reduced prices for e-publications (68% with regard to e-
newspapers/e-periodicals  and  50%  with  regard  to  e-books)  and  only  18%  expect  a 
reduced demand for print. The difference among sectors might be due to already high 
penetration of digital publications in the newspaper market.  

Finally,  with  regard  to  super-reduced  and  zero  rates,  a  difference  can  be  observed 
between readers,  authors and researchers  on the one hand and the printing industry 
and  publishing  industry  on  the  other  hand.  The  first  group  is  undecided  about 
abolishing  super-reduced  and  zero  rates,  whereas  both  the  printing  and  publishing 
industry  not  surprisingly  argue  strongly  against  abolishing  super-reduced  and  zero 
rates  (74%)  and  demand  to  allow  Member  States  applying  such  rates  to  all 
publications (on average 66%).  

Previous public consultation 

In 2008, as a result of the open consultation "Review of existing legislation on VAT 
reduced rates"55, there were suggestions that the reduced rate applied to supplies of 
books,  newspapers  and  periodicals  might  need  to  be  updated  to  also  cover  the 
supplies of these products in electronic form, as it would result in an equal reduced 
rate treatment of classic and similar digital goods. 

In  2011,  in  the  open  consultation  on  the  "Green  Paper  on  the  Future  of  VAT  - 
Towards  a  simpler,  more  robust  and  efficient  VAT  system"56,  the  supply  of 
electronically  supplied  publications  and  other  cultural  goods  or  services  were 
highlighted  by  interested  stakeholders  and  some  Member  States  as  candidates  for 
reduced  rates,  as  they  were  perceived  as  suffering  from  VAT  rate  discrimination. 
Publishers’ representatives largely supported the extension of the reduced and even 
zero  rates  currently  applied  to  printed  publications  to  electronically  supplied 
publications. 

The  results  obtained  from  the  first  two  open  consultations  on  VAT  reduced  rates 
served  as  a  basis  for  a  targeted  public  consultation  on  the  "Review  of  the  existing 
legislation  on  VAT  reduced  rates"57  in  2013,  asking  specific  questions  on  how  to 
implement an option for Member States to apply reduced VAT rates to electronically 
supplied services, in particular e-books: 

 

 

Do you agree that those electronic services that would qualify for the reduced 
rate  will  have  to  be  precisely  defined  in  a  uniform  way  at  an  EU  level  or  do 
you consider that a broad definition in the VAT Directive would be sufficient? 

Considering the need  for a uniform  and  future  proofed approach  at EU level, 
what should be the definition of an e-book in EU-law? 

The  large  majority  of  replies  to  the  first  questions  concerned  online  and  off-line 
publications  (books,  newspapers  and  periodicals).  Quite  a  number  of  respondents 
advocated  the  application  of  the  same  VAT  rate  to  similar  goods  and  services  and 

55 

56 

57 

See summary report of the consultation:  
https://ec.europa.eu/taxation_customs/sites/taxation/files/docs/body/summary_report_consultation_vat_
rates_en.pdf 
See consultation page: 
https://ec.europa.eu/taxation_customs/consultations-get-involved/tax-consultations/green-paper-future-
vat-towards-a-simpler-more-robust-efficient-vat-system_en 
See consultation page: 
https://ec.europa.eu/taxation_customs/consultations-get-involved/tax-consultations/review-existing-
legislation-vat-reduced-rates_en 

49 

 
 
                                                            
stress  the  need  to  precisely  and  uniformly  define  at  an  EU  level  those  electronic 
services that would qualify for the reduced rate. However, about the same number of 
respondents argued that a precise definition reduces the ability of Member States to 
adapt the terms  to  existing  national  legislation and  that  it would  add  complexity to 
the VAT system. In addition, a significant number of respondents pointed out that a 
definition  would  fail,  if  it  was  not  broad  and  robust  enough  to  cater  for  future 
technological developments. 

9.3.  Who is affected by the initiative and how? 

The  Commission  intend  to  grant  options  to  Member  States  by  the  legislative 
initiative. Consequently, the use of the options by Member States is determining the 
impacts.  If  Member  States  made  use  of  the  options,  it  would  affect  consumer,  the 
publishing industry, the printing industry, the environment and the simplicity of the 
VAT system. Lower VAT rates for publications would lead to lower prices for final 
consumers and increase profits of the publishing industry.  

9.4. 

Analytical models used in preparing the impact assessment  

The study used for this impact assessment: 

Ramboll, The Evaluation Partnership and Europe Economics, 2013 

“Economic  study  on  publications  on  all  physical  means  of  support  and  electronic 
publications in the context of VAT” 

aims  at  assessing  the  substitutability  between  physical  and  electronically-supported 
publications; evaluating the impact of current VAT reduced rates; and evaluating the 
impact of extending either the reduced rate or the standard rate regime to all kinds of 
publications. 

Data were obtained by case studies and surveys. 

The assessment of the impact of changes in VAT rates looks at a number of potential 
effects separating between supply and demand impacts (in print and digital formats): 

Demand-side effects are the reactions consumers might have if faced with a change 
in prices. The key aspect to consider when assessing demand-side effects is the 
extent to which consumers are sensitive to price changes (changes in price that 
might  result  from  an  increase  or  decrease  in  the  tax  rate),  and  the  extent  to 
which  consumers  consider  print  and  digital  materials  to  be  substitutable 
(including the extent to which an increase or decrease in the price of material in 
one support may result in migration to products delivered in the other support). 

(1)  Supply-side  effects  concern  the  supply  chain  of  publishing  material  and  how 
this might be affected by a change in the tax rate. Publishers and players within 
the supply chain might differ in their ability to absorb a tax rise or to react to a 
tax  decrease.  The  extent  to  which  suppliers  can  pass  on  to  consumers  any 
increases  (or  decreases)  in  their  costs  (including  changes  as  a  result  of  tax 
increases or decreases) is known as the ‘pass-on effect’. 

The impacts on the supply side, in conjunction with the demand-side effects, play a 
key role in determining the extent to which a change in tax is actually reflected in the 
final retail price. 

As  the  study  did  not  analyse  the  budgetary  impacts  for  Member  States,  own 
calculations on the basis of simplified assumptions, which are described under option 
1,  were  carried  out.  The  impact  is  calculated  on  the  basis  of  household  final 

50 

 
 
consumption  expenditure  in  Europe  on  books,  newspapers  and  stationery.  The 
calculation relies on several simplified assumptions, which are the following: 

- The first assumption relates to the additional VAT loss arising from non-deductible 
input  VAT  by  exempt  sectors  and  public  bodies.  This  is  estimated  at  20%  of  the 
VAT paid by households.  

- Expenditure on physical and digital books, newspapers and stationery amounted to 
EUR 91 billion in 2014. By deducting 10% to exclude miscellaneous printed matter 
and stationery and drawing materials, we estimate expenditure on books, newspapers 
and  periodicals  at  approximately  82  billion.  These  figures  are  gross  of  VAT.  The 
bulk  of  household  expenditure  originates  from  Germany  (28%),  France  (16%),  the 
United  Kingdom  (15%),  Italy  (10%),  Spain  (5%),  Poland  (4%),  the  Netherlands 
(4%), Belgium (2%), Austria (2%), Finland (2%), Portugal (2%) and Sweden (2%). 
The share of the other Member States is much more limited and ranges from 1.4% in 
Denmark to 0.1% in Malta.  

- Expenditure for books, newspapers and periodicals has constantly decreased during 
the  last  decade,  but  remained  stable  in  2014  for  the  first  time.  On  the  basis  of  this 
stabilisation, we assume for the sake of modelling that total expenditure will remain 
roughly  constant  in  the  future.  This  simplified  assumption  also  take  into  account  a 
potential increase in the number of e-publications due to lower VAT rates. Whereas, 
the  number  should  increase,  the  expenditure  should  remain  constant  as  new  e-
publications  are  expected  to  be  less  expensive  than  the  printed  publications  that 
disappear from the market. 

-  With  regard  to  e-publications,  their  market  share  of  currently  5%  is  expected  to 
grow to 20% in the medium term and an average VAT rate differential between the 
standard and the reduced VAT rate of 13.5 percentage points is taken into account. 

Full  details  on  the  methodology  used  for  the  study  are  given  in  the  following 
documents: 

Final Report 

http://ec.europa.eu/taxation_customs/resources/documents/common/publications/stu
dies/economic_study_vat_on_publications_finalreport.pdf 

Annex A: Member States reports 

http://ec.europa.eu/taxation_customs/resources/documents/common/publications/stu
dies/annex_a_ms_reports.pdf 

Annex B: Case studies 

http://ec.europa.eu/taxation_customs/resources/documents/common/publications/stu
dies/annex_b_case_studies.pdf 

Annex C: Surveys 

http://ec.europa.eu/taxation_customs/resources/documents/common/publications/stu
dies/annex_c_surveys.pdf 

Abstract 

The  study  is  motivated  by  the  Commission’s  assessment  of  the  current  VAT  rates 
structure and by the need to understand: the extent to which publications delivered on 
physical  means  of  support  and  in  electronic  format  should  be  considered  as 
substitutable  products;  the  impact  their  current  VAT  rate  differentiation  has  on  the 

51 

 
 
market; and the potential impact of any changes in VAT in order to reduce such rate 
differentials. 

The similarity (or dissimilarity) of products is investigated by assessing whether the 
products  delivered  through  different  means  (print  or  digital)  are  regarded  by 
consumers  as  substitutable.  The  underlying  approach  to  substitutability  is  based  on 
the  concept  of  cross-price  elasticity  and  tries  to  establish  whether  there  are  critical 
price  differences  that  make  consumers  switch  significantly  from  one  product  to 
another. An economic model populated with parameters estimated from survey data 
is  used  to  simulate  how  potential  tax  changes  would  impact  on  different  market 
outcomes (turnover and tax revenues). 

In relation to the potential substitutability of print and digital publications the study 
concludes  that:  (a)  print  and  digital  publications  are  not  part  of  the  same  relevant 
market; (b) consumers value print and digital products differently and this is linked 
to the different attributes and features of the different supports; (c) consumers are not 
likely  to  significantly substitute one product  for another as  a result of an impact in 
prices (although some migration from print to digital can be observed when the price 
of  digital  decreases,  but  the  magnitude  of  such  migration  has  been  estimated  as 
small). 

In  relation  to  the  potential  impacts of  VAT changes the study concludes that: (a) a 
large decline in the sales for publications in print will result as a consequence of the 
equalising rates up; and a large increase in the tax revenue (in the order of between 
100 and 300% for large geographical locations); (b) a moderate decline in sales for 
publications in print will result as a consequence of the equalising rates down; and a 
small  loss  (in  absolute  terms)  in  tax  revenue  (although  simulations  also  show  that 
some  large  Member  State,  like  the  UK,  may  have  a  reduction  of  100%  due  to  the 
complete drop in tax). 

52