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The European Commission may charge France and Luxembourg with infringing European Union (EU) VAT legislation, alleging that the reduced tax rates set by these countries for digital books “is creating serious distortions of competition”.
Digital books can be easily purchased in other EU countries than that of the consumer, with the VAT applied being that of the provider’s—not the customer’s—member state. Brussels is currently considering a move towards convergence of the VAT rates on traditional and digital books, but will not act until next year.
France and Luxembourg, however, have jumped the gun by applying reduced rates for digital books (3% and 7% respectively) from the beginning of 2012 and “some of the dominant players in this market have re-organised their distribution channels to benefit from these reduced rates”, according to the Commission. The two countries have submitted explanations to Brussels, which is now considering its next step.
UK Independence Party leader and MEP Nigel Farage—who last month called on the Commission to take legal action against France and Luxembourg—told The Bookseller that the UK was uniquely placed to take advantage of the huge e-book market because of its strong publishing sector, its skills in internet sales and the English language. However, he noted, “all that has been rendered worthless by the illegal actions of Luxembourg and France".