VAT and the Future of Journalism

In 2018, the UK government launched an independent review, led by veteran journalist Dame Frances Cairncross, to understand what could be done to preserve high-quality journalism in the digital economy. Supported by a panel of 11 industry experts, Cairncross published her recommendations earlier this month.

One of Cairncross's recommendations is extending the zero-rating of VAT to digital publications (including digital-only news publications). Print newspapers are currently zero-rated for VAT purposes. But because digital publications are viewed as services rather than goods, they do not enjoy the same VAT treatment. Cairncross argues that this favours a less successful form of news publishing over that which the public increasingly prefers.

An EU Directive that came out last year allows member states to align VAT rates for electronic and physical publications. A number of other EU countries, such as France and Ireland, are already taking steps in this direction. 

If the UK follows the lead, as argued by Cairncross, it will encourage experimentation and innovation in online content and business models. If that contributes in making high-quality journalism more affordable to ordinary consumers, thus making it more sustainable, this should be a change in law on which the government should not hold back.