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The French government has dropped its opposition to cutting VAT on unenriched e-books from 19.6% to 5.5% next year, even though this might contravene current European law, and hopes the new rate will come into force on January 1st.
Budget minister and government spokesman François Baroin had previously said although he was in favour of the measure, no action should be taken until the 27 European Union (EU) partners agreed.
But after the cabinet meeting yesterday (Wednesday), Baroin said the government backed the Senate’s proposal to go ahead immediately. The amendment to the 2011 budget will be discussed by an all-party committee of members of both houses of parliament on December 13th for a final vote two days later.
Culture minister Frédérique Mitterrand, who said recently that the lower rate should apply to all cultural products sold online, called yesterday’s announcement "a major advance". It removes a distortion of competition between electronic and print books and "an incoherence" pinpointed by the European Commission in its Green Paper on VAT released on December 1st, he said.
The consultative Green Paper called for "a fundamental review of the VAT system", which "no longer fits the needs of a service-driven, technology-based, modern economy". Its complexity "creates unnecessary costs and burdens" for all, and its weaknesses "leave it vulnerable to fraud and evasion". The Commission will unveil an overhaul of the system at the end of next year.
The government is understood to have decided against waiting for an EU-wide consensus after all because it is upset that online retail platforms based in countries such as Luxembourg pay lower VAT on e-books than their rivals in France.
Yorric Kermarrec, general counsel of Editions Flammarion, welcomed the French government’s change of heart. The 19.6% rate has been "a major handicap", and cutting it to 5.5% "should help the ebook market develop rapidly", he said.