A cut to zero in the rate of Vat applied to newspapers and digital subscriptions will be seen as a lifeline for the industry which lobbied hard to bring rates in line with European peers.
The Vat rate here will be cut to 0pc from January 1st in a move Finance Minister Paschal Donohoe said was designed to support the “critical role” of the free press.
“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 yesterday.
The move is in line with the government’s commitment to support an independent press and the Future of Media Commission’s recommendation, he said.
The current Vat rate for news subscriptions is 9pc. Until 2011 Vat was applied at the standard rate
From January 1, the new zero rate will apply to the print and digital sales of newspapers and news periodicals.
The cost in tax foregone will be €32m in the first year and €39m per full year, according to the Department of Finance.
Newspaper buyers in Britain, Denmark and Norway pay no Vat, while reduced rates apply across most of the continent, where it is rare to apply Vat at the standard rate to purchases of books, magazines or newspapers.
The news industry has been hammered by falling print sales and a major shift in advertising spending from traditional print and broadcast news brands to online platforms like Google and Facebook.
The full reduction measure was welcomed by Local Ireland, which represents 32 weekly paid-for newspapers around Ireland.
“Zero per cent Vat will allow local newspapers around Ireland to invest in journalism and in the transition to new digital business models,” said Local Ireland president Declan McGuire.
“News publishers have faced a series of major challenges over recent years, most recently the huge increases in the cost of newsprint. This move will help support jobs in the industry and sustain the quality of our service to readers.”
Many publishers are likely to look to retain some if not all of the Vat saving to boost margins which have been in decline for more than a decade, exacerbated in recent years by higher input costs including paper.