EU council allows removal of VAT from e-books

The EU's Economic and Financial Affairs Council (Ecofin) today (2nd October) agreed on a proposal which will allow all member states to give e-books and audiobooks the same VAT-free status as printed books. The UK Publishers Association has immediately called for the UK government to use the new powers.

The new rules don't force EU member states to align the rates, but allow them to.

The European Commission said the measure would "allow Member States to align the VAT rates they set for e‑publications, currently taxed at the standard rate in most Member States, with the more favourable regime currently in force for traditional printed publications" It added: "Today's decision is the final step to ensure that the unequal treatment of the two products - paper versus digital - becomes a thing of the past."

In the UK, aligning e-books with printed books would mean a 20% reduction in the tax currently applied to digital publications, which is not applied to print publications.

Stephen Lotinga, c.e.o. of the Publishers Association, said: “The government must act now to remove this unfair and illogical tax on e-books, magazine and newspaper online subscriptions. It makes no sense in the modern world that readers are being penalised with an additional 20% tax for choosing to embrace digital. We should not be taxing reading and learning.
 
“We are leaving the EU but today’s decision from the ECOFIN committee removes a major obstacle for the UK Chancellor, who should now do away with this tax at the earliest opportunity – namely the Budget on October 29th. The government’s preoccupation with Brexit should not delay him – if the UK does not act quickly it risks the UK digital policy falling behind its European competitors. This act would show the world that the UK is really serious about building a forward-thinking digital economy.”

Meanwhile Fabian Paagman and Jean-Luc Treutenaere, co-presidents of the European and International Booksellers Federation commented on the development: “EIBF has been advocating against tax discrimination on e-books for many years and the decision of lowering VAT rates on e-books is the result of the lobbying efforts of the bookselling sector at European level, represented by EIBF. Today’s decision finally resolves a long-standing issue. Whether a book is paper or digital, ordered online or bought in a shop, different tax treatment that hampers access to books should be avoided. From now on VAT rates on paper books and e-books will be aligned (if Members States so wish), a measure which will boost the e-book market and will further stimulate reading."

The step came amid other Ecofin agreements, including new rules to improve the day-to-day functioning of the current VAT system until the overall VAT reform strategy has been implemented. These so-called 'quick fixes' should reduce compliance costs and increase legal certainty for businesses, said the European Commission.

Pierre Moscovici, commissioner for Economic and Financial Affairs, Taxation and Customs, said: "New figures released by the Commission just weeks ago show that Member States are still losing €150bn in VAT each year. Today's agreements are another step towards addressing that problem and changing VAT rules for the better. Now is the time to seize the momentum and agree on solutions for the more fundamental problems facing the system today." 

Also among the measures agreed were new rules to improve the day-to-day functioning of the current VAT system until the overall VAT reform strategy has been implemented. These so-called 'quick fixes' should reduce compliance costs and increase legal certainty for businesses, said the Commission. Formal adoption of new rules to exchange more information and boost cooperation on criminal VAT fraud between national tax authorities and law enforcement authorities were also agreed.

The measures follow up on the VAT Action Plan towards a single EU VAT area presented in April 2016 and the Commission's proposals for a deep reform of the EU VAT system presented in October 2017.