News Corp VAT ruling presents outdated “definition” of digital newspapers

By Dr. Merja Myllylahti

Auckland University of Technology (AUT)

Auckland, New Zealand

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A new year — and a new decade — has just started. And one of the taxing questions concerning news publishers this year continues to be … about tax.

Late last year, the “What can be done? Digital Media Policy options for Europe” report argued policymakers in Europe need to support news publishers with tax reforms. The report urged policymakers to extend tax breaks from print to digital news.

An unusual definition of digital newspapers is at the centre of a recent VAT ruling.
An unusual definition of digital newspapers is at the centre of a recent VAT ruling.

Before that, Cairncross Review, which published a policy paper about the sustainability of the news media in the United Kingdom, recommended “the government should introduce new tax reliefs aimed at encouraging payments for online news content.” Additionally, it suggested the government expand the zero-rating of value-added tax (VAT) for digital newspapers — including digital-only news publications.

Recently, the upper tax tribunal in the United Kingdom decided the digital editions of News Corp’s newspapers the Times, Sunday Times, and Sun are eligible for the zero rate of value-added tax. According to the Guardian, the tax ruling will potentially save News Corp in the United Kingdom “enormous sums in the future and allow the company to claim back tens of millions of pounds from the government in overpayment of VAT.”

Currently, British digital newspapers are subject to the 20% standard VAT rate while print newspapers have zero tax. Will the decision hold after Brexit? What will happen to the corporate tax rates in the United Kingdom after Brexit is a completely different question.

The Guardian reports News Corp won the tribunal when it argued its digital newspapers were like the print versions “because the tablet edition and Web site are only updated four times a day and, hence, they met the legal definition of a newspaper.”

However, the tribunal’s ruling means digital news sites that are constantly updated are not exempt from VAT. It is hard to understand how, in 2020, rolling digital news sites do not have a similar kind of treatment. How many digital news sites are only updated a few times a day?

The tribunal judges, Justice Zacaroli and Judge Greg Sinfield, said News Corp newspapers promoted literacy and disseminated knowledge and “democratic accountability by having informed public debate in precisely the same way as the print version.” Surely this would apply to many more news sites around the globe.

In 2018, European Union finance ministers ruled that member states were to exempt digital publications from VAT, and around 13 European countries have started doing so. At the start of this year, digital books, newspapers, and magazines in the Netherlands were given a low-VAT rate of 9% instead of 20%.

Tax reforms have also been suggested in Australia and Canada. The Australian Competition and Consumer Commission (ACCC) is exploring tax offsets for news providers as well as tax deductions for digital subscriptions to encourage people to buy digital subscriptions. However, in its report of digital platform inquiry, ACCC pointed out there are “concerns with implementing and proposing tax incentives and subsidies.”

About Dr. Merja Myllylahti