(2004/C 88 E/0553)

WRITTEN QUESTION E-0833/04

by Catherine Stihler (PSE) to the Commission

(15 March 2004)

Subject:   VAT rating of 0 % or 5 % on all audio-books

Can the Commission inform me if it would have objections, and if so on what grounds, to the UK Government applying a reduced VAT rating of 0 % or 5 % on all audio-books? This would bring audio-books closer into line with the 0-rating on print books in the UK and ensure that people with sight loss are not penalised for reading books in audio format rather than print format. Such measures have been supported by the Royal National Institute of the Blind Scotland and other organisations of and for people with sight loss.

Answer given by Mr Bolkestein on behalf of the Commission

(30 April 2004)

Under present Community legislation, the United Kingdom has no legal base to apply a reduced VAT rating of 0 % or 5 % on audio-books.

The maintenance of zero rates was authorised by Council Directive 92/77/EEC (1) as a temporary derogation for the duration of a transitional period prior to the introduction of a definitive VAT system involving taxation in the country of origin. It is allowed on the condition that such rates were legally in force on 1 January 1991. Under these provisions, the United Kingdom was allowed to apply zero rates to books but not to audio books. This sort of derogation is an exception to the normal rules which foresee that the standard VAT rate should apply to all taxable transactions with an option for Member States to apply a reduced rate only to goods and services listed in Annex H (list of goods and services which may be subject to reduced rates of VAT) to the Sixth VAT Directive 77/388/EEC (2). Audio books are not, as such, included in Annex H so they are submitted to the standard rate.

The merits of extending the scope of reduced rates to new areas have been carefully examined. For historical reasons, the reduced rate applies to books in 12 Member States and the zero rate in two Member States (Denmark applies a unique rate of 25 % to all goods and services). On the other hand, all 15 Member States apply, at the current time, the standard rate of VAT to audio supports.

The proposal for a Directive concerning reduced rates of VAT (3) of 23 July 2003 aims essentially at improving the functioning of the Internal Market by rationalising the use of reduced rates by Member States to avoid potential distortions and by allowing Member States equal possibilities to apply reduced rates.

In terms of rationalising the present situation, category 6 of Annex H has not been modified by the Commission proposal and reduced rates applied to books can be maintained. Moreover, the Commission proposes including in category 4 the following goods:

Should this proposal be adopted, audio, video or other supports specially designed or specially adapted for the disabled could be subject to a reduced VAT rate. As there is no other definition at Community level, Member States will have to determine if audio books should be considered as part of this category even if the mainstream population can also buy and use them.

The Commission is aware of the problem the Honourable Member referred to and it will keep this question in mind during the negotiation of the Commission proposal of 23 July 2003, currently examined by the Council.

It is now up to the Council to decide, by unanimity, and in the light of the opinion of the Parliament, on the future scope of the reduced rates of VAT. However, a more targeted solution to this particular problem could perhaps be found outside the VAT system, by a national system of grants or refunds to compensate for the VAT paid. This matter falls within the competence of the United Kingdom authorities.

(1)  Council Directive 92/77/EEC of 19 October 1992 supplementing the common system of value added tax and amending Directive 77/388/EEC (approximation of VAT rates) — OJ L 316, 31.10.1992.

(2)  Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment, OJ L 145, 13.6.1977.

(3)  COM(2003) 397 final.