APPENDIX 119
Memorandum from HM Customs and Excise
Since the introduction of VAT in 1973, books,
newspapers and similar printed matter have been zero-rated, while
VAT has been chargeable at the standard rate on supplies of non-printed
information or data, including, for example, audiotapes[442].
2. When the UK introduced VAT in 1973, it
meant signing up to the general agreements that covered the application
of VAT throughout the Common Market. Under these and successive
agreements[443],
we have been able to maintain a strictly limited group of VAT
reliefs for certain goods including food, books and other printed
publications, most of which were exempt from the purchase tax
that preceded VAT.
3. These European agreements establish a
broad-based VAT system. While they allow the UK to retain one
of the most wide-ranging and generous packages of zero rate VAT
reliefs anywhere in the EU, they also prevent us from introducing
any new ones. This means that, if the Government were to accept
that printed and non-printed publications should be treated identically
for VAT purposes, this could only be achieved by making VAT chargeable
at the standard rate of 17.5% on printed publications. The Government
made a manifesto commitment in 2001 to maintain the existing zero
rates on food, children's clothes, public transport fares, and
books and newspapers, and remains committed to defending these
VAT reliefs.
4. Moreover, there are important differences
between print and digital publications: in the format by which
products are delivered; in the actual and potential content of
the publications; and in how this content is accessed and used
by consumers. For example, CD-ROMs and internet-based material
often include search facilities, audio and video recordings, internet
links and games or other interactive content, which are neither
characteristic of, nor possible for a printed paper product. These
differences not only mean that it would be impossible to bring
digital publications within the existing zero rate for printed
publications, but also make it reasonable to consider digital
and printed publications separately, and on their own merits,
when determining tax treatment.
April 2004
442 Clearly, the range of sources and formats of non-print
information has expanded considerably since 1973, for example
to include CD-ROMs, supplies made electronically over the Internet,
and other "digital" formats. However, because the scope
of VAT zero rates is defined on an inclusive basis-that is, that
zero-rating applies to a specific and fixed list of goods and
services-that scope has remained unchanged over the years and
will continue to do so.. Back
443
In particular Directive 77/388-Sixth directive on the harmonisation
of the laws of the member states relating to turnover taxes-common
system of value added tax: uniform basis of assessment. Back
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