EC 'will allow VAT on e-books to be lowered'

A European Commission (EC) ‘Action Plan’ on VAT will include proposals to allow countries to lower the VAT on e-books, The Bookseller understands.

The EC’s Action Plan on VAT was due to be published today (23rd March), but has been postponed following the terror attacks in Brussels yesterday (22nd March), which have so far killed more than 30 people.

A spokesperson for the EC confirmed to The Bookseller that a communication on e-books was due to be included in the VAT Action Plan, which will now be released at a later date.

The spokesperson said yesterday: “The launch of the VAT Action Plan, due to happen tomorrow, has been postponed owing to the attacks that took place in Brussels.”

A draft report on the VAT Action Plan suggested there were two options the EC was considering to give countries more flexibility in charging VAT—one being to allow countries to add items such as e-books and sanitary products to the list of the goods and services eligible for zero-rating, the other to bring in a new exemption.

The UK government has called for member states to have the option of charging a zero VAT rate for sanitary products after the issue attracted controversy. So far more than 300,000 people have signed a petition calling for so-called “tampon tax” to be scrapped. The zero-rate on products such as books was negotiated by the UK government when it entered the EU in 1973, but with the agreement that no new products or services could be zero-rated. Publishers, authors and booksellers across Europe have previously protested about the inequality of VAT charged at one level on e-books and at a different level on print books. The reason for this is because e-books across the EC are classified as an “electronic service” as opposed to simply an electronic version of a print book. Printed books, by comparison, are on the list of items which can benefit from a reduced rate of VAT. This means that in the UK, physical books are charged 0% VAT, but e-books attract the standard VAT rate of 20%.

The discrepancy has previously prompted calls from top retailers such as Amazon, Waterstones and The Book People for the VAT rate on e-books to be scrapped. The policy has also attracted condemnation from Federation of European Publishers, European and International Booksellers Federation and the European Writers Association over its inequality.

Publishers Association chief executive Stephen Lotinga told The Bookseller: “If correct, the greater flexibility in reducing VAT levels due to be announced by the European Commission is welcome.

“Current rules do not take into account technological developments in how people consume books and this has led to the inconsistent state of affairs which sees reduced VAT rates for physical books but not for e-books and other electronic publications. We know that reading is of fundamental importance to society and proven to improve people’s economic chances in life. The tax system should not act as a disincentive to reading and learning.”

European trade bodies for writers, publishers and booksellers have previously united together to urge the EC to treat e-books as digital books. In March last year, the group said: “We, the representatives of the book value chain, strongly believe that the value of a book does not depend on its format or the way it is accessed by readers. Therefore, we urge the Commission to take swift action to amend the relevant legislation to ensure it reflects technological progress and remove a serious hindrance to the development of the e-book market.”

Previously countries such as France and Luxembourg have been penalised by the EC for charging a super-reduced VAT rate on e-books.

However, even if a new rule has been agreed by EU Member States it will be up to the UK government to make the change.