“Will tax incentives fuel a new wave of subscribers?” This was the question posed in a recent INMA blog post that added to the growing discussion around ways in which news media organisations can secure a stable financial future.
But why is everyone suddenly talking about tax, and is it a viable option for the industry?
Already deductible (but only for work)
Many Australians are already eligible to claim news media subscriptions as a work-related expense on their tax return.
Australia is not alone in permitting this inclusion. UK taxpayers can claim a deduction for magazines and newspapers, but only if they are purchased “exclusively and necessarily for employment”, such as trade magazines.
The US, too, allows for subscriptions to magazines, newspapers, journals, newsletters, and similar publications to be included as a deductible expense when purchased for a business. The US also accepts deductions for Internet-based subscriptions for websites.
But there is an argument for all news media subscription being tax-deductible, not only those directly related to employment.
In February 2018 the Australian Government Select Committee on the Future of Public Interest Journalism published its report. One of its key recommendations was that the Treasury “undertake cost-benefit modelling on extending the tax deductible status of news media subscriptions to all Australians, not just those who can already claim the cost of subscriptions through existing income tax arrangements.”
This status would only be applied to subscriptions to news media organisations in Australia that “adhere to appropriate standards of practice for public interest journalism.”
Chapter 7 of the report contains a more detailed discussion of “broadening eligibility for tax rebates for subscriptions to news publications online for all Australians, as well as for Deductible Gift Recipient (DGR) donations to eligible media outlets.”
Funding news media
The ACCC Digital Platforms preliminary report released in early 2019, recommended that further research should be done into “improving the funding and production of news”, including through “making subscriptions tax deductible for consumers.” This recommendation was referenced in the UK’s Cairncross Review, an independent report examining threats to news media (particularly print media) in Britain.
The Cairncross Review also noted that partially tax-deductible news media subscriptions were in the process of being approved in Canada. While not explicitly advocating for a replication of this in the British system, the Review recommended that government “should introduce new tax reliefs aimed at encouraging payments for online news content and the provision of local and investigative journalism.”
What about removing GST?
Australia’s newspaper prices include GST, unlike many of our neighbors. In the UK, printed newspapers are zero-rated for VAT purposes, as are papers in Finland and in some states of the US such as New York State.
Other countries have sales tax reductions for newspapers. According to the EU’s European Centre for the Development of Vocational Training (Cedefop), countries that have reduced tax rates for newspapers include Austria, France, Germany, Ireland and the Netherlands.
What about online subscriptions?
In many countries, the exemptions that apply to print newspapers do not apply to their digital counterparts, representing a real challenge for an increasingly digitally-engaged world.
In some US states exemptions also apply to electronic versions of newspapers or periodicals, but only if they replicate the information in hard-copy versions.
In the UK, digital publications “do not currently enjoy the equivalent tax exemption, since they are viewed as services rather than physical goods.” However, as a result of an October 2018 approval by EU finance ministers, 13 member states are now expected to either remove or significantly reduce sales tax (VAT) on electronic publications.
Where to from here?
NewsMediaWorks included in our submission to the ACCC’s Digital Platforms Inquiry support for making personal subscriptions for publications by media businesses tax-deductible.
As yet, there is no clear blueprint for what this would look like. Some of the questions we will have to answer include:
NewsMediaWorks believes that making subscriptions to news media in both digital and print formats 100 per cent tax-deductible would be a viable contribution towards ensuring a sustainable future for journalism in Australia, including continued production of news journalism.
Tax deductions will make subscriptions more attractive to consumers. Making it easier for Australians to access the best journalism that our country has to offer can only assist in creating a better-informed and more discerning public.
The ACCC will release its final report on the Digital Platforms Inquiry in June 2019.