European Court dashes hopes for reduced VAT on E-Books, says KPMG in the UK
Commenting on a judgment from the Court of Justice of the European Union ruling that France and Luxembourg cannot apply a reduced rate of VAT to the supply of electronic books, in contrast with paper books, Mike Camburn, indirect tax partner at KPMG in the UK, commented:
“Today’s ruling would appear to be the final chapter for the argument that electronic books should have a reduced rate of VAT. Many argued that e-books should not be treated the same way as paper books with regards to VAT but this judgment reaffirms the position that across the board, electronic services per se cannot benefit from reduced rates. In order to be able to possibly revisit this, it would need a mighty effort by all Member states to actively lobby and legislate for new rules to get a reduced rate through.
“E-book sellers in France and Luxembourg will now have to charge the full rate of VAT (20 percent in France and 17 percent in Luxembourg). However, today’s decision does give raise to a further question as to whether the breach of the VAT rules by the two governments unlawfully aided e-book sellers which benefited from the previously reduced rates of VAT (5.5 percent in France and 3 percent in Luxembourg) in competing with the paper book providers.
“In the UK, traditional paper books will remain VAT free whereas e-books will continue to be subject to 20 percent VAT. Readers may well see this as fundamentally unfair but that’s what both UK and EU legislation prescribes.”