Michael P. Kitt
Question:72 Mr. M. Kitt asked the Minister for Finance the plans, if any, he has to reduce the high level of VAT on newspapers; and if he will make a statement on the matter. [2712/96]
Written Answers. - VAT on Newspapers.
I have no plans to reduce the VAT rate, currently 12.5 per cent, which applies to newspapers.
The position is that, under EU VAT law, member states have the option of applying one or two reduced rates, which may be as low as 5 per cent to a specified list of goods and services. However, while newspapers are on that list, a move to such a low rate would be very costly in terms of revenue foregone. While a separate 5 per cent rate solely for newspapers would be technically possible, it would inevitably give rise to immediate pressure from other sectors to be allowed the benefit of that rate. Moreover, the creation of a new reduced rate would be contrary to the policy, implemented by successive Governments over recent years, of consolidating and streamlining the VAT rating structure, where it is possible to do so.
I am well aware of the difficulties faced by the Irish newspaper industry. In particular, I recognise that there is stiff competition from UK publications sold here. However, this competition arises because UK newspapers enjoy greater economies of scale and lower production costs. The fact is that the competition involved does not arise from the rate of VAT on newspapers in Ireland, which applies equally to both Irish and to foreign publications. A reduction in the VAT rate here, even if that were possible, would not solve the core problem for Irish newspapers which is related to their costs structure and other commercial non-tax factors.
The Deputy will be aware that last year the Minister for Enterprise and Employment established a commission on the Newspaper Industry. I await the findings of that commission with interest.