Government: 'no scope to change 20% VAT rate on e-books'

Government: 'no scope to change 20% VAT rate on e-books'

There is “no scope” to change the 20% VAT rate on e-books, the UK government said this week.

A parliamentary question from Tom Harris, Labour MP for Glasgow South, on whether the government has carried out any assessments of the impact of the e-book market on publishers, authors and readers solicited the following response from the Treasury’s Exchequer Secretary David Gauke: “The sale of a digital book is classified as an electronic service and attracts the standard rate of VAT under EU law. Legal advice obtained by the government indicates there is no scope to change the VAT treatment of the sale of digital book and similar products under EU law. As such, no assessments have been made of the type referred to by the honourable member.”

Gauke reiterated the line that EU law prevents it from lowering the VAT rate on e-books despite the fact that France and Luxembourg have already flouted the rule and Germany is considering lowering VAT on e-books to 7%, as it recently has on audiobooks.

Print books in the UK have a 0% VAT rate.

In response to a similar question from Harris, Ed Vaizey, creative industries minister, said the department had made no direct assessment of the effect of growth in the UK market for e-books on authors, publishers and readers, reasoning that “the existence of digital platforms, such as e-books, increases the multimedia possibilities for authors and publishers, and provides consumers with more choice. The sector is continuing to seize the opportunities presented by digital technologies and the UK e-book industry is continuing to develop even further.”

He added that the creative industries were a “great success story” for the UK, and recently published statistics showed that they were worth of £9.7bn to the UK in 2012, employed nearly a quarter of a million people, and worth of £1.25bin in export of services in 2011.  

From 1st January 2015, VAT legislation across the EU will change to tax the supply of broadcasting, telecoms and electronically supplied services, including e-books at the place of consumption. Currently, retailers such as Amazon, Barnes & Noble’s Nook and Kobo pay a 3% VAT rate on e-books by basing their European headquarters in Luxembourg (which charges 3% VAT) and saying that it officially vends e-books to the UK from that country.