When the European Court of Justice ruled earlier this year that France and Luxembourg could no longer tax ebooks like they were books but must instead charge the higher standard tax rate, the ruling proved unpopular, with four EU member states protesting the decision.
Now one of those countries is backing up its words with a legal challenge. The Bookseller reports that Poland has challenged Europe’s tax regulations on procedural grounds:
Last week, Poland’s Constitutional Court challenged the ruling that VAT on e-books must be at member states’ higher, standard rates and requested a review of the position on the grounds that the European Parliament was not consulted on the legislative procedure for the compilation of the list of EU VAT exemptions. Poland’s constitutional court also argued the ruling breached fiscal neutrality – meaning the purchase of a printed book versus an e-book equivalent should not be distorted by the differing VAT treatments imposed by the EU.
To recap, under the EU’s tax laws books are granted a special status and taxed at a lower rate (in some member nations, books aren’t taxed at all) while ebooks are classified as a service and taxed at each nation’s standard VAT (15% to 25%, usually).
Over the past few years several EU countries have challenged the regulations by changing their own national tax laws. In 2012 France and Luxembourg were the first to lower the taxes collected on ebook sales, followed by Italy and Malta in late 2014. (France and Luxembourg’s legal maneuver proved unsuccessful earlier this year when they lost the court battle before the European Court of Human Justice, but I’m told that Italy and Malta are still charging the lower tax rate.)
The vigorous debate over the ebook tax rate has led the European Commission to propose a lower tax rate on ebooks. That proposal would be put forward sometime in early 2016, but now thanks to Poland’s legal challenge it could be preempted before it becomes law.
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