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UK to end VAT for digital subscriptions

The changes will make it easier for creators to start their own subscriptions and membership programs.
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Good news for digital publishers and consumers in the UK, where the new government has moved to abolish the value added tax (VAT) levied on online newspapers, e-books, and academic journals.

However, publishers of audiobooks will not be exempt from the 20 percent VAT rate. Among the products and services that are already not covered by VAT are physical books and periodicals.

The scrapping of VAT on digital publishing came in Chancellor of the Exchequer Rishi Sunak’s first budget presented in the UK parliament.

The move seems to have come in response to a petition signed last fall by over 600 authors, and if approved by MPs, will come into effect on December 1.

VAT is incorporated in the final price of products paid by consumers, and publishers could, in theory, choose to keep the 20 percent as extra profit – but as Sunak said in his budget proposal, the UK government expects them “to pass on the benefit of this relief to consumers.”

However, Jim Waterson, and editor with the Guardian, was quick to point out that the new VAT rule could earn News UK £20 million a year – should the publisher of the Sun and the Times decide to keep such windfall for itself.

The same is true of every other publisher, however.

Among those who are happy about the decision was 404 Ink who announced it would once again be able to sell e-books. The Publishers’ Association, the UK trade body for electronic book and journal publishers, said they were “delighted” by the news.

Previously, this body calculated that institutions of public importance, such as universities, libraries, government departments and the country’s healthcare service NHS could save up to £55 million each year if VAT were to be scrapped.

The Publishers’ Association pointed out that taxing digital newspapers and books, while leaving their physical counterparts out of the VAT scheme, is a discriminatory practice that is now coming to an end.

However, not everyone was equally pleased: the Royal National Institute of Blind People (RNIB) said the exclusion of audiobooks was a disappointing development, acknowledging at the same time that blind persons who use e-readers will still benefit from the decision.

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