French publishers warned on e-book VAT rise

French publishers warned on e-book VAT rise

The French Publishers Association (Syndicat National de l’Edition, SNE) has warned its members that France may raise VAT on e-books from 5.5% to the standard 20% during the first half of next year to avoid a fine of several million euros from the European Court of Justice, according to the trade publication Livres Hebdo.

The judge in charge of the case is expected to hand down a ruling shortly, and would undoubtedly impose a fine for infringing community law, the magazine said. That would leave publishers with the choice of passing on the increase, which would wreck France’s budding e-cbook market, or reducing booksellers’ and their own margins, it said on its website. “We strongly advise our members to prepare for this eventuality (of a VAT hike) in planning their budget for the second half of 2015,” the SNE said in an email to members.

The European Commission filed a complaint with the Court against France and Luxembourg in 2013 for unilaterally cutting VAT on e-books to bring the rate into line with that charged on print versions. France first reduced the rate to 7% on Jan. 1, 2012 and to 5.5% a year later.

The Court decision would just be a question of principle, since the distortion to competition alleged by some European Union countries will end next Jan. 1, when VAT will be shifted to the country of the buyer from that of the retailer. Until then, Amazon is benefitting the most from unfair competition, Livres Hebdo noted. When selling to the a resident in the UK, Europe’s leading e-book market, the US group charges the Luxembourg rate of 3%, whereas a UK bookseller would have to charge 20%.

The SNE said it will continue to lobby for a reduced rate, and will follow the Italian example in seeking extensive media coverage.