France Passes New Law With Higher Tax Rate for DRMed eBooks

Hardly anyone likes DRM France Passes New Law With Higher Tax Rate for DRMed eBooks Taxes on their content, and its various opponents respond in various ways, whether by public advocacy or by voting with their pocketbook. And then there is France, which decided to express their displeasure with a new tax law.

France has amended their tax laws with a new lower tax rate for DRM-free ebooks (or a new higher rate for DRMed ebooks, depending on how you look at it). The new law won't go into effect until 2015, but once it does Amazon, Apple, Kobo, and all the other major ebookstores will all be penalized for selling DRMed ebooks to French customers.

Update: The law has been unpassed.

Under France's new tax laws, DRMed ebooks will be taxed at a higher rate (currently 19.6%), while DRM-free ebooks will be taxed at the lower 5.5% rate.

As I am sure many already know, ebooks are already sold in France with a 5.5% VAT, or value added tax, bundled into the list price. Technically that is illegal under current EU regulation; ebooks are defined as a service and thus should have a higher VAT applied. But no penalty has been applied (so far) so at this point it is really a matter of opinion.

France Passes New Law With Higher Tax Rate for DRMed eBooks Taxes And just to add extra confusion to the matter, EU tax law will itself be changing in 2015, and under the new rules ebooks will be taxed at the lower rate (the one that France is not supposed to be charging right now). The new EU tax laws will also require retailers to collect taxes based on the customer's location and not based on where the retailer is based.

As you can imagine, this is going to close the Luxembourg tax loophole enjoyed by Amazon, Kobo, and a lot of other ebook retailers, but just as importantly this new tax law will create an opportunity for France to penalize the sale of DRMed ebooks.

DRMed ebooks will cost more - theoretically. Speaking as someone who has long been an advocate of DRM-free, I think this is great news, although I'm not sure how much of an effect it will have.

Given that ebook prices vary wildly based on market, publisher, popularity, and sales status, I'm not sure that anyone will notice the difference. Also, France is one of the countries with a fixed price law for books (and ebooks), which further complicates the pricing situation.

There has been a growing movement among French and other European publishers to go DRM-free, and this will likely inspire some to make the switch. But a good part of the French book market is controlled by major publishers who could be immune to the financial pressure.

On a related note, I have to say that I wish they had thought to include audiobooks as well. They could have deDRMed that market as well. It might be relatively tiny at the moment but that's no reason not to apply the same tax laws to it.

What little info I have on the French ebook market says that it is a 3 way race between Amazon, Kobo, and Apple, with Amazon slightly in the lead.

Actualitte

images by Kimberly Vardeman, Mike Licht

 

 

 

 

Nate Hoffelder

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Nate Hoffelder is the founder and editor of The Digital Reader: He's here to chew bubble gum and fix broken websites, and he is all out of bubble gum. He has been blogging about indie authors since 2010 while learning new tech skills at the drop of a hat. He fixes author sites, and shares what he learns on The Digital Reader's blog. In his spare time, he fosters dogs for A Forever Home, a local rescue group.

12 Comments

  1. fjtorres15 November, 2013

    The effect it will have is z-e-r-o.
    As long as publishers insist on DRM the tax will apply to all vendors equally so the differential result will be zero. Especially since the law doesn’t seem to distinguish between encryption DRM and watermark DRM.
    Just another across-the-board tax increase on consumers.

    Reply
  2. StevH15 November, 2013

    I dunno. French consumers may just choose to buy less DRM-ed ebooks as a result. Methinks Amazon, which currently has no option for publishers to switch a DRM-ed book to non-DRM, will have to add somesort of functionality to let publishers change this for the French market. Have to wait and see.

    Reply
  3. […] Fuente  – The Digital Reader […]

    Reply
  4. LCNR15 November, 2013

    Unfortunately, *it’s not final yet*: the government has put the amendment to a new vote before the Senate (http://www.actualitte.com/legislation/ebook-et-systeme-proprietaire-vote-face-du-gouvernement-sur-la-tva-46350.htm?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Actualitt-UnePageDeCaractre+%28Actualitt%C3%A9+-+Une+page+de+caract%C3%A9re%29) and you can bet the major publishers, who license DRMed e-books for the most part and were caught unawares the first time, will not let it pass so easily this time round.

    As for it being “just another across-the-board tax increase on consumers” (fjtorres), let’s not forget that France actually brought the VAT rate _down_ from the 19.6 % which should apply according to EU law; if the amendment is enacted, it will simply restore the old rate, and only for DRMed e-books, while potentially resolving the current EU issue (by distinguishing between the “sale” v. the “licensing” of e-books) – not to mention that it’s fair and decent. Don’t want to pay the higher VAT rate? Buy DRM-free books! (You should be doing that already anyway.)

    LCNR

    Reply
    1. Nate Hoffelder15 November, 2013

      Thanks! I hadn’t seen that yet.

      Reply
      1. Nate Hoffelder18 November, 2013

        A pity, yes, but not a surprise.

        Reply
        1. fjtorres18 November, 2013

          Nope.
          Given that publishers are unwilling to let go of their DRM “blankie” and the mainstream consumer doesn’t care about DRM, a differential tax on DRM-ed ebooks is effectively a blanket tax on traditionally-published ebooks.
          No surprise that the publishing establishment squealed.

          Reply
      2. Georges18 November, 2013

        Le Gouvernement a rejeté cet amendement. Il était sans aucune efficacité et n’aurait rien changé à la situation actuelle. Cette proposition de loi vient des opposants aux droits d’auteurs en France qui souhaitent que les fichiers puissent être librement copiés et partagés

        Reply
        1. Nate Hoffelder18 November, 2013

          GTranslated: “The Government rejected this amendment. There was no effective and would not have changed the situation. This bill comes from opponents of copyright in France who want the files may be freely copied and shared”

          This is FUD, but I’m going to let it stand anyway.

          Reply
          1. fjtorres18 November, 2013

            Don’t be so sure.
            The primary target of the tax wasn’t really DRMed ebooks.
            When first proposed, the named targets were Amazon and Apple. And, as stated, taxing all DRMed ebooks would not have been effective at tilting the ebook market against them because Kobo and the local bookstores would also be impacted. The biggest beneficiaries would be indie ebooks and since Amazon is the biggest indie ebook vendor, the tax would have ended up helping them. Which is probably why the government killed it.

          2. LCNR20 November, 2013

            Actually, the government killed it because applying two different VAT rates for e-books would supposedly undermine France’s position in its struggle with the EU for an overall reduced VAT rate (that’s what the government’s amendment says, anyway).

            As to the motives of the French Deputy behind the original proposition, they are explained on her web site (http://isabelleattard.eelv.fr/amendement-tva-sur-les-livres-numeriques-pour-une-sortie-vers-le-haut-du-conflit-avec-la-commission-europeenne/). Although she does cite Amazon as an exemple (and Google, too), the goal is really threefold:
            1. To show respect to readers (who should be free to read on any device they choose)
            2. To favour those smaller publishers that have opted for DRM-free e-books
            3. To resolve the EU dispute by reverting to the higher “services” rate for “licensed” e-books and keep the reduced rate for DRM-free e-books
            In the end, I think people may have had varying reasons for wanting the proposed rule to pass, but I for one thought that it made sense (though I’m no VAT or political expert).

            Oh, and a petition was started to try and have the differentiated rate restored. 🙂

            LCNR

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