Recently, both France and Luxembourg were given a slap on the wrist by the European Commission after it was deemed that e-books, unlike physical books, were not applicable for a tax reduction. Both countries which have been selling e-books at a lower tax rate of 5.5% and 3% respectively since the start of 2012 have been told that e-books are ineligible for a reduced tax rate and they should raise the rate of VAT back to 20% and 17%.
The difference which makes paper books eligible for reduced tax compared to ebooks seems to be that e-books are not considered a physical good as they require a computer or e-reader in order to consume them. The fact that these products are always supplied separately means that e-books are considered a service not a good. This means that e-books cannot be considered a ‘tangible property’.
This follows other news that as of this year the general price of e-books has risen in Europe following changes to the rules of VAT. Amazon had hinted previously that it would be increasing the price of e-books as of 2015 in order to offset some of the new charges to publishers.
With the world moving into the digital age, Forbes estimates that Amazon, the world’s largest e-book supplier, sells around 150-300 million e-books a year worldwide. Ever since the production of the iPod, consumers have been moving towards purchasing digital media movies, music, games and of course books over physical copies due to the ease downloading products anywhere and of the ability of being able to share your media over a range of devices, such as storing a book on both your e-reader and your computer.
It is so far unclear whether these changes in tax will have an effect on all types of digital media in the future.
What do you think of the latest tax ruling?