French government drops opposition to VAT on e-books

<p>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.<br /><br />Budget minister and government spokesman Fran&ccedil;ois 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.<br /><br />But after the cabinet meeting yesterday (Wednesday), Baroin said the government backed the Senate&rsquo;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.<br /><br />Culture minister Fr&eacute;d&eacute;rique Mitterrand, who said recently that the lower rate should apply to all cultural products sold online, called yesterday&rsquo;s announcement &quot;a major advance&quot;. It removes a distortion of competition between electronic and print books and &quot;an incoherence&quot; pinpointed by the European Commission in its Green Paper on VAT released on December 1st, he said.<br /><br />The consultative Green Paper called for &quot;a fundamental review of the VAT system&quot;, which &quot;no longer fits the needs of a service-driven, technology-based, modern economy&quot;. Its complexity &quot;creates unnecessary costs and burdens&quot; for all, and its weaknesses &quot;leave it vulnerable to fraud and evasion&quot;. The Commission will unveil an overhaul of the system at the end of next year.<br /><br />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.<br /><br />Yorric Kermarrec, general counsel of Editions Flammarion, welcomed the French government&rsquo;s change of heart. The 19.6% rate has been &quot;a major handicap&quot;, and cutting it to 5.5% &quot;should help the ebook market develop rapidly&quot;, he said. </p>