News publishers welcome zero VAT rate as ‘tax on information’ ends

Budget 2023: Screen industry hails extension to Section 481 tax credit as Government hints at new incentives for unscripted production

Newspaper publishers have won their battle for print and digital newspapers to be zero-rated for VAT, with the representative group for national titles, Newsbrands Ireland, describing it as “a good day for journalism”.

Minister for Finance Paschal Donohoe confirmed the move, widely seen as a financial lifeline for the sector amid a series of cost pressures, declining print circulation and difficulties in growing digital revenues.

It is effective from January 1st, 2023.

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“The Government is aware of the critical role that newspapers play in our society, from reporting on local communities to holding those in power to account,” the Minister said.

The change, costed at €32.5 million in the first year and €39 million in a full year, is “in line with the Government’s commitment to support an independent press”, he said.

It also reflects a recommendation made by the Government-appointed Future of Media Commission in its report, published in July.

The announcement was greeted by some cheering from the Dáil press gallery and Government benches.

It is not expected that the measure will be passed on to consumers in the form of lower cover prices or subscription charges.

In its pre-budget submission, Newsbrands Ireland had branded VAT on newspapers as a “tax on information, learning and democracy”. The existing 9 per cent rate on print newspapers and digital subscriptions is one of the highest in Europe, with 22 European states having lower or zero rates.

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Until recently, EU law generally prohibited zero VAT rates unless specific derogations had been granted to members as part of their EU accession treaties. But amendments to the EU VAT directive agreed last December and adopted in April give member states more flexibility in how they apply VAT to certain products and services, including print and digital newspapers.

The 9 per cent rate had applied to print newspapers since the introduction of this reduced rate of VAT in 2011, but until 2019 digital editions were subject to the standard 23 per cent rate.

Newsbrands Ireland chairman Colm O’Reilly, who is chief operations officer of the Business Post Group, was among those to have urged the zero-rating in light of what he described as “a real and present threat to the sustainability of Irish news publishers”.

In an opinion article in the Sunday Times, Mr O’Reilly identified a threefold increase in energy costs and a rise in the cost of newsprint (printing paper) from €390 a tonne to €960 a tonne as among the challenges facing publishers, alongside the dominance of digital platforms in the online advertising market.

News publishers would be “unable to maintain reporting on social, political and economic matters” unless an urgent change was made to VAT, he wrote.

Bob Hughes, executive director of local newspaper body Local Ireland, said the new zero rate would support employment and its members’ service to readers and also help the industry’s transition to digital business models.

“A free, vibrant media is vital to our democracy,” said Mr Hughes, responding to Mr Donohoe’s announcement on Twitter.

Screen industry measures

Ireland’s thriving screen industry received an extension to the Section 481 tax credit for film, television and animation production from the end of 2024 to the end of 2028, giving assurance to projects in development that there will be no unfavourable withdrawal of the corporation tax relief by the time they go into production.

While the extension beyond the end-2024 date was always likely, it was not expected to be announced for a further 12 months.

Susan Bergin, who chairs the state development agency Screen Ireland, welcomed the news and thanked Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media Catherine Martin for her “significant support and recognition of the Irish screen industry”.

The tax credit “underpins the success” of the Irish screen sector, Ms Bergin said: “It is essential to the further growth of the industry, creating increased job opportunities, spend in the Irish economy across the country, and most crucially, structured skills development for Irish crew nationwide.”

Screen Producers Ireland (SPI) said it was disappointed not to see the simultaneous extension of Section 481′s regional uplift, which provides an extra tax incentive to productions based outside the Dublin-Wicklow industry hub and has helped broaden the geographical spread of the industry.

SPI chief executive Susan Kirby said the organisation would continue to advocate for the regional uplift extension. The representative body for production companies nevertheless welcomed the general extension of the credit.

“We’re delighted to see this extension, which will provide our members with the clarity they need to develop future projects.”

The Minister for Finance also hinted at new incentives for the unscripted production sector “to encourage international players to locate here” and help sustain indigenous employment, saying he had asked officials to “explore the opportunities for Ireland” in this area.

Factual and entertainment television programmes are currently excluded from the Section 481 tax credit, although a US network quiz show, the latest iteration of Name That Tune, was filmed in Dublin earlier this year, co-produced by Dublin company BiggerStage, and there are hopes that more such business can be lured to the Irish market.

Broadcasting funding

Elsewhere in the media sector, the Government allocated €7 million to fund the establishment of the Media Commission (Coimisiún na Meán), the regulator that will replace the Broadcasting Authority of Ireland and also oversee online safety regulation.

Ms Martin said a new provision of €15 million would be made available for public service broadcasting to address the Future of Media Commission recommendation to provide an interim funding boost to RTÉ ahead of promised licence fee reform.

Some €6 million will also be allocated to a new media fund supporting local democracy and court reporting, while TG4 will receive a €7.3 million increase in its funding in 2023, which it welcomed.

“This significant increase in the TG4 budget shows the Government’s confidence in the management and staff of TG4 and in the independent creative sector that provides world-class content for Irish audiences,” said director-general Alan Esslemont.

“Media has a great influence on minority languages around the world because it confers status on those languages. TG4′s strategic vision is to get to a level of resources on a par with those of S4C in Wales and EITB in the Basque Country. Work will now continue to achieve that goal.”

Laura Slattery

Laura Slattery

Laura Slattery is an Irish Times journalist writing about media, advertising and other business topics