It's regressive, unfair and damaging: will VAT on digital publications be dropped today, asks Ruth Howells?
As the UK's new chancellor of the exchequer, Rishi Sunak, delivers the Government's long-awaited Budget today, the UK publishing industry will be watching and listening closely for an announcement about zero-rating VAT on digital books. Will the tax anomaly between print and digital books finally be history?
The Publishers Association and others have long campaigned on this issue, calling for the UK Government to zero-rate digital publications in line with print and rectify this outdated and illogical tax disparity. Print books are rightly zero-rated, but consumers currently pay 20% VAT on digital books and audiobooks. This digital penalty affects millions of people, including everyone who reads or learns digitally.
We want this to change, as it's illogical and unfair. Why tax one form of reading over another? Reading is reading, whatever format you favour. It simply shouldn't be taxed.
"Fairness is at the heart of the matter"
The Axe the Reading Tax campaign has built significant momentum during the last year, culminating in the public release last month of a letter calling for change from over 600 authors including Cressida Cowell, Stephen Fry, Bernardine Evaristo and Konnie Huq. Voices from across the industry have united. Supporters of the campaign include the Society of Authors, the Association of Authors' Agents, the National Literacy Trust, Royal National Institute of Blind People and Rakuten Kobo.
Over 140 parliamentarians (MPs and peers) from across the UK's political parties have voiced their support too - signing letters, attending events and raising questions in parliament. Parliamentarians support the campaign for a variety of reasons, chief among them accessibility and literacy. They recognise that this tax may penalise young readers, those from low income backgrounds and those who struggle to read print.
Fairness is at the heart of the matter. It has been a long-held principle of successive UK governments not to tax reading, learning and knowledge. However, as digital reading materials have developed, the Government has reneged on this principle by enforcing a tax on them. In 2018, the EU Council changed the law to allow member states to reduce the rate of VAT on ebooks and other digital publications. Many countries - among them France, Iceland, Ireland, Italy and Malta - have already equalised their VAT rates.
Penalising the disadvantaged
This is a tax that disproportionately affects those who may struggle to read or handle print books. For example, the 2 million people in the UK living with sight loss for whom digital books can be a lifeline. People who are blind or partially sighted can listen to audiobooks or read in large print sizes on electronic devices. Digital formats offer a number of additional features for those with accessibility needs, including those with dyslexia, the elderly, and disabled people who may lack the physical capabilities to handle print books with ease.
Writers and publishers want to make books for everyone, and people want to read in a wide variety of ways. Consumers are embracing books in all formats, and those formats are largely co-existing - but digital may be particularly important for reaching new readers.
The National Literacy Trust (NLT) recognises that digital formats are becoming increasingly important in supporting children's literacy and providing additional access points to reading materials. The NLT's research has found that over 45% of children prefer to read on a digital device and that young people from low income backgrounds are more likely to read digitally. Digital reading also provides opportunities to engage reluctant readers, particularly disengaged boy readers.
Digital books can lead some children to reading who may not have any print books at home - the NLT shows that one in 11 don't have a book of their own at home, and this rises to one in 8 children on free school meals.
Of course, there are many budget-related asks, and the Treasury must look closely at every issue. What will this measure cost? What are the benefits? Research undertaken by Frontier Economics shows that the annual costs to the Exchequer of zero-rating digital VAT would be approximately £210m.
However, publicly funded institutions such as universities, libraries, government departments and the NHS are large digital consumers, and would benefit considerably from the removal of the tax. When they are taken into account, the cost would be around £155m - only 0.03% of total tax receipts.
Frontier's research also predicts that a cut to the tax would result in significant market expansion and an increase in the number of readers, books sold and a wider breadth of authors able to get their products to market.
There are many compelling reasons why this change to the law should be made. We'll be watching the Budget closely, hoping the arguments prevail and that digital VAT in the UK will finally be consigned to history.
Ruth Howells is deputy director of external affairs at the Publishers Association.