European politicians debate about VAT and the price of e-books

The price of e-books has been subject of political discussion in Brussels the last few weeks. The European Parliament (EP) is of the opinion that the VAT rate on digital books, newspapers and magazines should be reduced significantly, to boost the EU digital single market. The EP adopted a resolution on this issue.

Currently, European consumers pay 6% value added tax for physical books bought in a bookstore. For the same book in a digital form, 19% VAT is charged. The same goes for digital newspapers and magazines. The EP resolution adopted states that EU countries need the liberty to apply a lower VAT rate to digital books, newspapers and magazines. The EP resolution is not legally binding, but urges the Commission to take action.

The difference in taxation for physical and digital products derives from the fact that in the existing system, digital books, newspapers and magazines downloaded from the Internet are classified as services rather than goods. If the file is “printed” onto a data carrier, like a CD, the ebook will be regarded as a product in many cases. "An absurd situation," said MEP Judith Sargentini (Greens/EFA). "By giving offline content a preferential treatment over online content, Europe sets themselves at a disadvantage in the digital economy, while that digital segment is the growth market of the coming years."

Political discussion on the question whether the price of ebooks and related content should be regulated, or whether lower VAT rates should apply has also emerged at the individual member state level. France has recently passed a law that places ebooks downloaded from the Internet under the low VAT rate, by January 2012. The Spanish government has similar legislation in preparation, although technically, this might go against EU rules.

In the Netherlands, there has been a minimum price for regular books for decades. With digital content on the rise, this price regulation might disturb the development of the digital single market. The Dutch Secretary of Culture Halbe Zijlstra, however, told his Parliament that he is not planning to set a fixed price for electronic books. Commissioned by former minister Ronald Plasterk, a study on the influence of e-books on the book sector in general revealed that the share of e-books in the Dutch market for reading content is still very small: less than 1% of book sales in the Netherlands is digital. Based on this research, Zijlstra sees no reason why the price of e-books should be regulated. “This would not be in the interest of innovation in the media sector.”

The French and Spanish policymakers can count on the support of the EP, as the Parliament urged the European Commission to take the initiative for a new VAT regime for digital content within a year.

Sources: Publishing Perspectives; Nu.nl; ereader.nl; BN De Stem