French trade revolt over VAT

French trade revolt over VAT

The French book trade has reacted badly to the government’s decision to raise the reduced VAT rate on books from 5.5% to 7% on 1st January as part of a financial package to help shrink France’s mushrooming public deficit.

The French Publishers Association (Syndicat National de l’Edition, SNE) and the French Booksellers Association (Syndicat de la Librairie Française, SLF) condemned the move, as did several members of parliament and the opposition Socialist party. The party warned the book sector was in imminent danger with “little hope” for publishers and independent booksellers. It said the budget-saving measure was ridiculous.

The SNE said it regretted the absence of consultation over the move while the SLF warned that it could cut average net profits from 0.3% of sales to 0.2% and lead to the closure of hundreds of bookshops. Alexandre Bompard, c.e.o. of French cultural products chain FNAC, was reported as saying that the increase threatened the fragile book sector, which was already under pressure.

He was backed by the Syndicat des Disributors de Loisirs Culturels (SDLC), which comprises Decitre, FNAC, Cultura, Le Furet du Nord and Virgin Stores. The rise would “generate large losses” on stocks acquired with 5.5% VAT, and “create insurmountable problems” in a market where prices are printed on books, he said. Already the decline in sales of books by bricks and mortar stores this year is undermining chains, which are having to absorb higher overheads, it added.

French authors have also joined the resistance. Writers “are doubly concerned” by the increase, as it would affect both the pretax book price on which their royalties are based and the royalties themselves, said the Société des Gens de Lettres (SGDL). Even if publishers decided not to pass on the extra tax to consumers, the higher VAT rate could lead to a drop in numbers of copies sold.

SNE president, Antoine Gallimard, took a more moderate stance. He said in an interview with the French trade publication Livres Hebdo that Editions Gallimard, which he heads, would probably raise prices slightly, but on a case-by-case rather than systematic basis. “It is not a big increase, [and] book prices will not rise too much.”

The government announcement came just before the statutory instrument allowing publishers to set prices for all e-books sold in France was published last week and less than two months before VAT on e-books is reduced to the same rate as physical books on 1st January.

Gallimard said that his company would pass the saving from the lower VAT rate for e-books on to consumers and that the association would recommend other publishers do the same. This means that the price of e-books would be 30% to 35% below print version prices.

Even if the European Commission fines France for introducing the cut without the approval of its EU partners, Gallimard said that culture minister Frédéric Mitterrand had assured him that the state would pay any fine and not the ­publishers.

Opening the 4th Avignon Forum on Culture and the Economy last Friday (18th November), President Nicolas Sarkozy confirmed that the reduced VAT rate on ebooks would be applied next 1 January as planned, and said he hoped the European Commission would not oppose it. In an interview on Buzz Média Orange-Le Figaro, broadcast on Monday, culture minister Frédéric Mitterrand said he had the impression from European Digital Agenda Commissioner Neelie Kroes the move should not spark “adverse procedures” by the commission against France.