The European Union has voted to allow the 28 member states to apply lower value added tax (VAT) rates to electronic publications, including e-books and downloadable audiobooks. The ruling, which was approved by the Economic and Financial Affairs Council of the E.U. and was proposed 18 months ago, is the culmination of a long process of trying to introduce competitive tax rates for e-books.
"Today's decision is the final step to ensure that the unequal treatment of the two products—paper versus digital—becomes a thing of the past," the European Commission wrote a statement.
Until now e-books have been subject to the higher VAT rates applied to computer software, rather than the lower, privileged VAT rates allowed for print books under E.U. law. The new agreement allows, but does not oblige, member states to lower VAT rates on e-books to that of print books, which in some countries is as low as zero. It is viewed as a temporary measure until a wider ruling is made to revise overall VAT regulations covering digital and electronic copyrighted material.
Though the regulations governing application of tax cover the entire membership of the E.U., each country is allowed to determine and apply their own rate of tax. In Spain, to take one example, the e-book VAT rate is currently 21%, while print books carry a 4% VAT rate. Most countries charge VAT on e-books of around 20%–25%. Hungary has the highest e-books VAT rate at 27%.
As for which countries are most likely to reduce or alter VAT, that still remains to be seen. In the past, several countries, starting with France in 2010 (and followed by Luxembourg, Italy, and Spain), tried to lower VAT on e-books to put it on par with VAT on print; in all instances, the reductions were deemed illegal and the rates reverted back to the higher numbers.
Reaction to today's ruling has been positive.
Rudy Vanschoonbeek, president of the Federation of European Publishers, said in a statement, "This forward-looking decision marks the end of the unjustified fiscal discrimination between publications in different formats, acknowledging the cultural, social and economic value of books, journals and educational materials in all formats and the technological progress that has taken place in the sector."
European Independent Booksellers Federation co-Presidents Fabian Paagman and Jean-Luc Treutenaere also praised the vote. “Today’s decision finally resolves a long-standing issue," they wrote in a statement. "Whether a book is paper or digital, ordered online or bought in a shop, different tax treatment that hampers access to books should be avoided. From now on VAT rates on paper books and e-books will be aligned (if Members States so wish), a measure which will boost the e-book market and will further stimulate reading.”
In the U.K., where e-books are currently charged at a VAT rate of 20% (while the VAT on print books is at zero), the Publishers Association reiterated a call to eliminate VAT on e-books. “The government must act now to remove this unfair and illogical tax on e-books, magazine and newspaper online subscriptions," Stephen Lotinga, CEO of the Publishers Association, tweeted. "It makes no sense in the modern world that readers are being penalized with an additional 20% tax for choosing to embrace digital. We should not be taxing reading and learning,"