The harmonisation of VAT across print and digital books could move a step closer this week with the European Council to debate the level of VAT imposed on e-books this Thursday (24th October).
According to the TMF Group, the Polish presidency has proposed harmonising the amount of VAT charged on e-books in a "downwards" direction. Currently, an EU directive dictates that European countries impose the upper rate of VAT on e-books, but France charges their lower rate of 5.5% and Luxembourg, where Amazon, Kobo and Nook have their European headquarters, charge just 3%. In the vast majority of European countries print books are VAT free, as in the UK, or the lower rate is charged.
Richard Asquith, head of tax at the TMF Group, told The Bookseller that he expects the discussion to conclude that e-books should carry the same VAT rate as print books, which would mean they could attract a 0% VAT in the UK. He added that he believed this could mean a reduction in e-book prices by £1 if retailers pass on the rate reduction to their customers, but because Amazon, Kobo and Nook vend e-books from their European base in Luxembourg, the change is only likely to affect companies like Waterstones, which sells its own e-books from the UK, and National Book Tokens, which also has its own e-books site for independent booksellers.
Asquith said Thursday's European Council debate follows the European Commission's failure to force France and Luxembourg to raise its VAT, after they lowered it at the beginning of last year. In October last year, the Euopean Commission issued a "reasoned opinion" ordering France and Luxembourg to raise its e-book rate, but this has so far failed to result in a referral to the European Court of Justice.
Asquith said: "The EU's attempt to force a rise across Europe in e-book VAT rate to the higher rate seems to have drawn a blank. It has lost a number of similar tax cases on fiscal neutrality - charging different rates for essentially the same goods. The more powerful Council may finally bring a solution that benefits the UK consumer."
From 2015 a change in VAT legislation means e-book companies will have to charge VAT at the rate where the customer is who buys the e-book, rather than at the rate where the servers of the e-book business are based.