The French Publishers Association (Syndicat National de l'Edition, SNE) has reaffirmed its support for its government's decision to cut VAT rate on e-books, despite mounting pressure from the European Commission.
Both France and Luxembourg are edging towards a fine from the European Commission for having unilaterally reduced VAT on e-books to bring the rate into line with that on print versions.
Last week the EC gave both governments one month to restore the standard rates applying to electronic services, which stand at 19.6% in France and 15% in Luxembourg‚ and cover e-books. If they fail to comply, the EC is threatening to take them to the European Court of Justice.
Reacting to the EC's warning, the SNE said it would submit its arguments on reduced rates in consultations on VAT opened by the EC on 8th October so as to "put an end to the current unjustifiable two-tier situation."
The consultations indicate that the EC is particularly concerned about VAT on e-books, the SNE added.
Most analysts say that the French government is not expected to change its position on e-book VAT. However, the 2013 budget will restore the 5.5% rate on print books as of 1st January 2013, as promised by President Francois Hollande during this year's presidential campaign. The rate on books was raised to 7% on 1st April 2012 under former president Nicolas Sarkozy to help rein in public deficits.
One leading book trade analyst admitted to being perplexed by the EC's reactions to the VAT hikes. "It is paradoxical that the EC starts consultations on VAT reform at the same time as accelerating the disciplinary process [against France and Luxembourg]," the analyst said.
Even though the EU reform would probably allow reduced VAT on e-books, France does not wish to wait. "Two years is long for such a market," the analyst added. "A lot can change in that time."
The EC's instruction to France and Luxembourg came in a so-called "reasoned opinion", the second of three steps in the EC's disciplinary process, and noted that plans are afoot to submit proposals before the end of 2013 for an overhaul of VAT in the European Union in 2015.
On 1st January France reduced the tax on e-books to 7% and Luxembourg to 3%, the same rate that applies to physical books. They argued that it made no sense to differentiate between the two versions, a principle actually endorsed by the EC.