Charging VAT on digital books is “holding back the development of the e-book market in general, and especially in non-English and small-language markets”, the International Publishers Association’s (IPA) José Borghino has said.
A global survey of VAT rates, conducted by the IPA and the Federation of European Publishers (FEP), has found there are “wide contrasts between [rates on] print and digital, as well as between nations and between regions”.
The survey looked at 79 countries – 36 in Europe, 13 in Asia, 13 in Africa, nine in Latin America, five in the Middle East, plus Canada, Australia and New Zealand.
The US was not included, as each state has its own individual sales tax regime.
Worldwide, only 22% of countries apply their standard rate of VAT of GST (Goods and Services Tax) to printed books, while 69% apply standard VAT to e-books.
The survey found that 37 countries apply the same rate of VAT/GST to print and e-books, and 35 countries apply a higher rate of VAT/GST to e-books than to print.
The average rate applied to printed books is 5.75% and to e-books is 12.25%.
Denmark applies the highest VAT rate on printed books at 25%, while the highest VAT rate on e-books, of 27%, is applied by Hungary.
Borghino, policy director of the IPA, which advocates a zero rate for physical and digital books, said the “fact that many countries already apply reduced rates of VAT/GST to physical books is a clear acknowledgement of the strategic importance of books”.
“Those countries that have not already done so should take the next step and zero rate books,” said Borghino. “We believe a zero VAT/GST rate to be the best way to support reading, education and a thriving knowledge economy.”
Borghino said that “in many countries e-books continue to be subject to an unwarranted discrimination that neglects technological developments”.
“Even where printed books are zero-rated or have reduced rates of VAT/GST, e-books are deemed to incur a higher rate purely because they are delivered digitally,” he said. “This distinction is holding back the development of the e-book market in general, and especially in non-English and small-language markets.
“In the new digital environment where consumers expect lower prices and authors ask for more royalties, the application of higher VAT/GST rates on e-books (as compared to p-books) increases their relative price, restricts their market, and runs contrary to numerous initiatives to promote digital literacy."
He added: "This different VAT/GST treatment disproportionately affects persons with print disabilities, who often have no choice but to buy the digital version of a book, which is more accessible to visually impaired people but is also subject to a higher VAT/GST rate and is therefore often more expensive.
“Reducing VAT on e-books makes obvious sense if we want to keep reading affordable, regardless of format."
In order to support the knowledge economy, to encourage reading, and to promote the benefits of life-long education, the IPA recommends a zero-rating for books no matter what their format is and how they are accessed, Jose said.
In the European Union, 26 out of 28 member states apply reduced rates of VAT to print books. In 2009, the EU allowed reduced rates for all forms of physical books, including audiobooks.
Enrico Turrin, deputy director and economist at the FEP, said that the “next logical step” would be for member states to be allowed to apply reduced rates to all types of books.