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The UK should consider raising VAT on non-tax items, according to a recommendation from the International Monetary Fund (IMF).
In the recommendations released last week as part of its review of the UK economy, the IMF assessed the UK's current economic climate, and made suggestions as to what could be done to reduce debt and ensure growth.
Printed books currently have 0% VAT, along with other goods such as children's clothes and some foods. In contrast, e-books have VAT applied at the full rate of 20%.
In the report, the IMF said: "Revenue measures could include reducing tax expenditures (such as VAT zero-ratings)", but it did not specify which items should be considered.
A recent expert report to the European Commission argued that reduced or zero rates of VAT in EU member states should be removed from physical books to create a single rate across digital and physical. However European Commission vice-president Neelie Kroes, responsible for Digital Agenda, said: "Personally I would prefer that taxes are equalised downwards."
Germany has recently lowered VAT on audiobooks to 7%, and is considering similar moves on e-books. France and Luxembourg both have rates of 5.5% and 3% respectively, while both booksellers in the UK and the International Publishers Association (IPA) have attacked the current set-up, with the IPA calling it "technophobic, backward and unfair".
Last month the government said there was "no scope" to change the current 20% VAT rate on e-books here in the UK.
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 and saying that it officially vends e-books to the UK from that country.