The UK chancellor George Osborne has confirmed that e-books will be taxed from the consumer’s European member state from 1st January 2015.
A little-noticed section of last week's budget announcement confirmed that from the start of next year, e-books and other e-services including broadcasting and telecommunications will be taxed in the European member state in which the consumer is located, as opposed to where the book is sold from. The move is set to ensure that e-books are taxed “fairly and helping to protect revenue," the chancellor said.
The decision was originally announced in 2013’s budget and means a loophole which allows companies like Amazon, Kobo and Barnes & Noble to sell e-books to the UK from Luxembourg will be closed. In the UK, e-books attract a 20% VAT whereas Luxembourg charges a much lower 3% VAT.
Official estimates suggest the move could raise an extra £300m for the Treasury, according to The Guardian. However, consumers are also concerned the new rule will mean rising costs of downloads of music, dvds and e-books.
UK-based retailers which sell e-books such as Waterstones, The Book People and E-books by Sainsbury’s are likely to welcome the decision because it levels playing field between them and larger multi-nationals such as Amazon and Kobo.
Last October, UK booksellers have called for VAT on e-books to be scrapped altogether and replaced with 0% VAT, which is what print books attract.