European Commission Proposes that eBooks be Sold with Reduced VAT
Proving once again that they are the inspiration for Vogons in Douglas Adams’s Hitchhiker’s Guide series, the European Commission announced a couple proposals on Thursday which should lessen the cost and bother of collecting taxes.
The commission proposed the development of a single EU-wide web portal where businesses could submit their Value Added Tax receipts for each of the EU’s member states. (The EU has a stupid rule that VAT must be collected based on a customer’s location, which necessitated this portal.)
The commission also proposed that ebooks and other digital content be taxed at the same rate as the equivalent physical media.
By introducing an EU wide portal for online VAT payments (the 'One Stop Shop'), VAT compliance expenses will be significantly reduced, saving businesses across the EU €2.3 billion a year. The new rules will also ensure that VAT is paid in the Member State of the final consumer, leading to a fairer distribution of tax revenues amongst EU countries. Our proposals would help Member States to recoup the current estimated €5 billion of lost VAT on online sales every year. Estimated lost revenues are likely to reach €7 billion by 2020 and it is essential that we act now.
Finally, the Commission is delivering on its pledge to enable Member States to apply the same VAT rate to e-publications such as e-books and online newspapers as for their printed equivalents, removing provisions that excluded e-publications from the favourable tax treatment allowed for traditional printed publications.
eBooks are currently taxed at each EU member state’s full VAT rate, while many of the countries collect a much lower VAT on print books, paper newspapers, and similar media.
That incongruity frustrated many in both industry and government, and inspired the governments of France, Luxembourg, and other EU states to pass laws which lowered the VAT rate on ebooks to match print books.
Because, obviously, following proper procedures is more important than changing an unpopular tax law when it is opposed by multiple countries.
I don’t understand it, either, although I do see where EU bureaucrats (or its predecessor, the EEC) may have inspired the idea for Adams’s Vogons.
In any case, if the proposal is accepted by all EU countries they will have the option – but not the requirement – to lower the VAT on ebooks to match that of paper books.
This could happen as early as mid-2017.
That will be good news for Italy and Malta, which had illegally lowered the VAT on ebooks in December 2014.