FutureBook’s Philip Jones has a piece looking at the problems of value-added tax (VAT) on e-books in Europe. The fundamental problem is that, in the UK, e-books are charged the highest possible VAT rate, 20%, while print books have been exempt from VAT for decades. Other parts of Europe are in similar situations. This has the effect of inflating the price of e-books and slowing down their adoption compared to paper.

When Parliament member Tom Blenkinsop asked the UK Chancellor of the Exchequer about reducing or eliminating VAT for e-books, the Chancellor said, essentially, that under EU agreements they did not have any choice about the VAT rates they charged. However, that is not stopping other European countries such as France and Luxembourg from acting to reduce e-book VAT rates.

So why the UK intransigence? If he was really awake the [exchequer secretary] might also have paid attention to a recent memo published by the EU that sought to clarify how VAT needed to be modified in member states following a consultation with those countries. The EU specifically stated that the review should take as a principle that "similar goods and services should be subject to the same VAT rate and progress in technology should be taken into account in this respect, so that the challenge of convergence between the on-line and the physical environment is addressed”. French Culture Minister Frédérique Mitterrand has already welcomed the communication and said in a statement that he applauded the comment in the 16-page document on fiscal neutrality.

Blenkinsop is not going to let the matter drop, Jones writes, and will continue pushing in Parliament for a reduced VAT rate. As the e-book market grows, reducing that rate means giving consumers more money to spend on e-books, and hence pass along to e-tailers, authors, and publishers. The bigger the market gets, the more important that move will become.

I hadn’t been aware that tax rates on e-books were so high in the UK. It kind of puts the squabbles over Amazon collecting state sales tax in a bit of perspective. Hopefully they will soon be able to get that brought down.


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