By Lina Saigol
Shares of the “Harry Potter” publisher Bloomsbury Publishing rose almost 5% after British Chancellor Rishi Sunak scrapped a “reading tax” on e-books — as investors hoped the move would conjure up more sales.
Announcing the news in his first budget on Wednesday, Sunak said the 20% levy on digital publications, including books, newspapers, magazines and academic journals, will be scrapped from Dec. 1 in time for Christmas.
Sunak said a world-class education will help the next generation to thrive. “Nothing could be more fundamental to that than reading. And yet digital publications are subject to VAT. That can’t be right. So today I am abolishing the reading tax,” he said.
The chancellor’s announcement sent shares in London-listed Bloomsbury /zigman2/quotes/206373853/delayed UK:BMY +5.26% , which publishes “Harry Potter” among other titles, up by almost 5% before falling 1.34% at 15:20 GMT.
Stephen Lotinga, CEO of the Publishers Association, which represents U.K. book and journal publishers, said the decision to ax the reading tax will bring an end to the “illogical and unfair” tax on those who need or prefer to read digitally, and should contribute to an increase in literacy in the U.K.
“We are delighted that the government has decided to zero-rate VAT on digital books and journals in the budget. It’s fantastic that the chancellor has acknowledged the value of reading,” Lotinga said.
The Publishers Association estimates that the tax costs British consumers over £200 million a year.
The European Union passed legislation in 2018 allowing its member states to drop or lower the 20% sales taxes on electronic publications in October 2018. France, Italy and Belgium were among those agreeing to reduce taxes, but readers in the U.K. continued to pay the sales tax on digital publications.
In February, nearly 700 authors including Stephen Fry, Dolly Alderton, Children’s Laureate Cressida Cowell, “50 Shades of Grey” author E.L. James and “Chocolat” author Joanne Harris signed a letter to the chancellor asking for the reading tax to be abolished.
Sunak, taking a swipe at the opposition Labour Party’s shadow chancellor, said: “There will be no VAT on historical fiction by Hilary Mantel, manuals or textbooks like ‘Gray’s Anatomy,’ or indeed works of fantasy like John McDonnell’s ‘Economics for the Many.’ ”