VAT a 'huge problem' in the move from print to digital

One of Europe's largest magazine publishers has warned that the media industry's shift to digital is being "hurt" – because of overly complicated rules on tax.

Jens Henneberg, editorial director at Bonnier Publications in Denmark, told the Future Media Lab conference in Brussels that a confusing mix of different VAT rules on digital products across different EU member states was putting up "a big obstacle that has to be addressed" – and that finding a solution was "critical".

Many EU member states have preferential VAT rates for the printed press. At the moment, a newspaper publisher in France who sells a physical copy in a newsagent pays 2.1 per cent. But most digital products that they sell there are taxed at 20 per cent. This becomes complicated when a publisher sells a bundled print-digital subscription.

We're trying to find good business models from the internet. The VAT issue will hurt the European media industry in this transformationJens Henneberg, Bonnier Publications

The situation has been complicated further since 1 January, when new European VAT rules mean that companies who sell digital products to individuals must charge the VAT rate of the country where the buyer is based. This could range from 17 per cent in Luxembourg to 27 per cent in Hungary.

Henneberg told Journalism.co.uk: "It will hurt the way we transform our industry. If the reader has a digital edition of a newspaper five days a week and a printed edition two days a week there will be different VAT considerations.

"Maybe 80 per cent of our consumption is print now and 20 per cent digital. Five years down the road it might be 50:50 - but different VAT on different products will slow down this process because you want to keep the revenue where you don't have to pay that additional VAT.

"It's a complicated situation – a huge problem.  We're trying to fight it, especially in these years where the media industry is very vulnerable due to the steep decline in major revenue sources.

"We're trying to find good business models from the internet. The VAT issue will hurt the European media industry in this transformation."

Bonnier Publications, part of the family-run Swedish media group, publishes more than 50 titles, translating and re-editing them for readers in Denmark, Norway, Sweden and Finland.

The European Commission in Brussels acknowledges that "too many barriers still block the free flow of online services across national borders".

It is embarking on a wide-ranging project to create a "connected digital single market", which it believes could generate billions of euros in additional growth. However, it is understood that the issue of VAT might not be formally addressed during this reform.

Jonathan Hill, head of cabinet for the European commissioner for culture, Tibor Navaracsics, told the Future Media Lab conference there was a debate to be had about how tax rates could be harmonised between printed and digital publications - and at what level those rates should be set.

He told Journalism.co.uk: "What we understand is the tax departments of the European Commission will come forward with a broader VAT reform later this year and that will be the moment to have the debate on rates and harmonisation."

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