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Community Connections: European libraries feel effects of VAT on e-publications

European libraries feel effects of VAT on e-publications
By Leo de Vos, Head of Pricing, Science & Technology, Elsevier, Amsterdam, The Netherlands

Leo de Vos

At the moment, many libraries are hanging in limbo, stuck between traditional print materials and the advancement of electronic publications. Statistics tracked by libraries often compare usage metrics and budget percentages allotted for each format so as to try and find a happy medium for users who prefer holding physical forms of information in their hands and users who routinely conduct research using online resources.

In the European Union, an often important consideration in whether to keep a majority of resources in print or begin the conversion to e-only is the Value Added Tax (VAT) charged for print versus electronic publications. VAT, also called Goods and Services Tax (GST), is a tax on exchanges and is levied on the added value resulting from each exchange. In the EU, this tax is levied at a higher rate for electronic publications and a reduced rate for print publications including journals and books. For instance, in the Netherlands, VAT is 6% for print and 19% for electronic resources. As result, a purchaser sees a higher bill for the same content in electronic form.

In most EU member states (e.g., Belgium, Germany, Ireland, Italy, Malta, the Netherlands, Spain), libraries pay the full VAT charges on their electronic resources. However, in some EU member states, libraries are exempted or reimbursed. For example, Danish government libraries are VAT-exempt; Austrian and Swedish libraries are annually reimbursed for their VAT expenditures; and, in the UK, certain libraries that have outsourced parts of their operations can reclaim percentages of their VAT. Further, national consortia in the Czech Republic and Lithuania allow libraries to obtain resources without paying VAT.

Quantifying VAT impact

A 2006 survey by The Frankfurt Group aimed to quantify the impact of VAT on budgets in libraries across Europe. Libraries, for the most part connected to universities, were surveyed about their budget distribution with respect to print or electronic resources; hindrances to the transition from print to electronic resources; and national VAT regulations.

Regarding hindrances to the transition from print to electronic resources, when the collected data was sorted by libraries with VAT exemptions and those without, it became clear that VAT indeed made an impact on the nonexempt libraries’ switch to e-publications. The survey found that compared with other factors including budget reductions, increased costs, user resistance, problems with digital preservation and problems with management and access to electronic information services, for non-VAT-exempt libraries, VAT proved to be the most important hindrance in the switch to electronic format.

This graph (SOFI, 2006, Figure 15) shows that when asked about hindrances
to the migration from print to electronic publications, representatives of
non-VAT-exempt libraries identified VAT as the most important.

Impact on P-to-E migration

While print publications are still plentiful, it may be difficult to justify spending extra funds such as VAT to obtain access to electronic formats of materials that libraries may already have. Here’s a case in point. Drawn from results of the same survey, a comparison between a German (non-VAT-exempt) library and a Danish (VAT-exempt) library with comparable budgets over the 2003–2005 time span revealed that the Danish library altered its budget over the two years, allotting more funds towards the purchase of e-publications, but the German library without a VAT exemption did not increase over the same two years its budget used to purchase e-resources.

Libraries with VAT exemptions have one less thing to worry about when it comes to the switch from print to electronic format. But, even for these libraries, the survey identified increased costs as an important problem.

Regarding the migration of ScienceDirect customers from P to E, Elsevier has noticed a migration to 100% e-only in countries like Sweden (where there are VAT exemptions or reimbursements) and a more gradual change in countries like the UK (where only particular libraries can reclaim some VAT).

Value of information

At the heart of the debate over money and e-publications is the value of information. Tax on published content should be the same whether it is on a screen or a page. Current tax laws from the pre-personal-computer era favour the print medium. VAT is slowing down the progress of e-only migration, a migration bringing advantages including widening accessibility by overcoming geographical limits and adding — through searching and linking functionality — value to words and images previously contained in print at one location.

While it is clear that in the EU the transition from print to electronic publications is affected by VAT, it’s not always clear for individual libraries to what extent VAT is a hindrance to the transition. However for the EU, as for the rest of the world, one thing’s for certain: E-resources are here to stay, and librarians and users fully understand their value.