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EU Court Rules eBooks Aren’t Books, Orders Tax Rates Increased

When one is confronted by new technology, one can either adapt existing rules to suit the new tech or one can blindly apply the rules – even when it doesn’t make sense.

The European Court of Justice chose the second option this week when it handed down a ruling (PDF) which declared that ebooks weren’t books, but were actually digital services and should be taxes as such.


Following a several-year-long legal battle, the ECJ ruled that France and Luxembourg were wrong to lower the VAT they charged on ebooks.

From the WSJ:

In its ruling, the court argued that a reduced rate can only apply to physical books and that even though electronic books can be read on tablets and computers, they should be considered “electronically supplied services”, not goods. According to EU law, reduced VAT rates can only apply to goods, not e-services.

Back in 2012 Luxembourg reduced the VAT it assessed on ebooks from 17% to 3%, the same rate it charged for paper books. It was followed a short time later by France,which dropped the tax rate to 5% (and then late last year Malta and Italy followed suit and cut their VAT rates on ebooks from 18% to 5% and 22% to 4%, respectively).

France and Luxembourg were sued by the European Commission in 2013 over this matter, lost, and then appealed to the ECJ. The court ruled against them, and now all four countries will have to raise their rates.

Luxembourg and France have already indicated that they will comply with the verdict while at the same time they plan to push for a revision to EU VAT rules. "Luxembourg is of the opinion that consumers should be able to buy a book with the same VAT rate, be it online or in bookstores. We will continue to advocate for adapting the EU legal framework to technological advancement," the Luxembourg finance ministry said in a statement.

French culture minister Fleur Pelerin told France Inter radio that: "We will continue to push for what is called technological neutrality, meaning the same taxation for books, irrespective if they are on paper or electronic."

While the ruling does fit with existing EU regulations, it is still absurd.  While the EU requires that ebooks be taxed as a service, many countries in the EU view ebooks as books and enforce fixed price book laws on their respective ebook markets.

In short, ebooks are denied both the benefit of price flexibility and the benefit of the lower tax rate, resulting in the worst of both worlds.

image by tolworthy

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fjtorres March 5, 2015 um 11:24 am

The worst of both worlds is what the corporate publishers want.

purple lady March 5, 2015 um 12:24 pm

Does the EU have different rates for software purchased by download and software purchased in a box in the store? That’s the same kind of difference between paper books and ebooks.

Nate Hoffelder March 5, 2015 um 12:30 pm

Paper books get a lower rate because they are cultural artifacts (or something like that). It’s one of the few exceptions to the generally high taxes in the EU.

Software gets the higher tax no matter what.

purple lady March 5, 2015 um 2:06 pm

I guess that means there’s no special snowflake software.

Andrew March 5, 2015 um 9:22 pm

Book do not have DRM. Ebooks with DRM are a service, not a good. I do not think the court was entirely wrong.

Nate Hoffelder March 5, 2015 um 11:29 pm

Given that not all ebooks have DRM, and that DRM is not an intrinsic characteristic of ebooks, this is a false distinction.

LCNR March 8, 2015 um 6:29 pm

Actually, it is a distinction that was pushed by at least one French deputy (Isabelle Attard) at the time (as I recall and as I believe you reported): DRMed e-books as a service subject to a licence and hence the higher VAT rate, and non-DRMed e-books as books actually sold (not licenced) at the lower rate, like their physical counterparts. (Which in my opinion is rather artificial as for me a book is defined by its content, not by its medium, though, as DRM itself is absurd in the first place, at least such a solution has a certain logic to it, and in any case it would be really nice to see DRM given a handicap if it might push more publishers or authors to give up on it.)

Nate Hoffelder March 8, 2015 um 8:01 pm

I would phrase it as she tried to introduce the distinction and was rebuffed. And I agree, it was an artificial distinction.

Scott Nicholson March 6, 2015 um 8:44 am

Until the gray area of whether an ebook transaction is a sale or a license is clarified, then any decision on what constitutes a "book" is ephemeral anyway. A licensed download can reasonably sound like a "service" to me. But then I see no reason paper books should get a special tax exemption. I guess somebody has to pay for all the free health care.

Bob W March 6, 2015 um 1:52 pm

One would think they would consider the reason why books are sold with a lower sales tax and then consider if e-books would align with that original reason. Instead they play a shell game. It’s a good thing people are easily distrac…

puzzled March 7, 2015 um 4:20 pm

Oh, look! A cute cat video…

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