Juncker takes on e-book VAT
(CS) After Luxembourg was ordered by the European Court of Justice to increase its VAT on e-books for violating regulation on digital services taxation, Commission president Jean-Claude Juncker has announced a planned VAT reform.
In a speech delivered at an event hosted by the Federation of German Newspaper Publishers in Brussels last week, Juncker commented that the reform would address the issue of taxation of digital newspapers and books.
“VAT should be technology-neutral,” Juncker said, explaining that VAT rates for digital formats should be brought in line with print media.
It was precisely this issue, which got Luxembourg into trouble with the ECJ. The Grand Duchy classified e-books as books, which benefit from the super-reduced 3 percent rate in the country, and not digital services, taxed at a higher rate.
In its March 2015 verdict, the ECJ said that the reduced rate can only be applied to books as objects. While a physical support, such as a tablet or computer, is necessary to read an ebook file, this does not constitute a “book found on a physical medium,” the ECJ ruled.
Electronically supplied services are excluded from the scope of reduced VAT rates to protect the internal market from “distorting effects”, with the complaint against Luxembourg put forward by the European Commission in 2012.
The Commission also took France to court over the same issue.
With the EU making progress on its digital single market agenda, the tide could now turn in favour of Luxembourg and France.
Juncker announced the planned VAT reform for 2016.
Amazon Luxembourg welcomed the news. “Amazon welcomes the announcement from the European Commission’s President, Jean-Claude Juncker, that a lower VAT rate for digital books will be proposed next year. Like many of our customers, we feel strongly that books in any format should be subject to the same reduced VAT rate – a book is a book and its cultural and educational significance stem from the content of the author’s work, not its format,“ a statement said.
A significant change in e-commerce VAT already came into effect with the start of the year, as e-commerce tax is now paid in the country of the buyer, not the seller. Luxembourg is expected to lose out on hundreds of millions of euros in taxes due to this change.