Why campaigners are wrong to ask the British government to abolish tax on ebooks
The current British tax on ebooks is so unpopular that this online petition calling on the government to abolish it has close to 4000 signatures: http://epetitions.direct.gov.uk/petit....
But these campaigners are wrong.
Don’t misunderstand me. Forcing readers to pay 20% VAT on ebooks is unfair, and, as regular readers of my posterous blog know, I’ve gone on record at the New York Times to say so: http://goo.gl/E09re. The thing is, petitioning the British government won’t work because the government cannot abolish the tax.
Don’t you think it would have done so already if it could? Look at Amazon, which has about 85% of the UK ebook market. Amazon.co.uk is tax registered in Luxembourg, where the VAT is lower, at 15%. This means that roughly 85% of all potential tax revenue from British ebook sales currently goes to Luxembourg. You think this is something the government wants?
Of course not. But the government’s hands are tied. All because it is bound by European Union law, which says that EU member states must charge VAT on ebooks.
Not only that, but each country must also charge their standard rate of VAT – which in Britain means 20%. As pointed out in this article http://goo.gl/GPZxZ, this means that ebook readers will pay £12.99 for the digital version of Walter Isaacson’s biography of Steve Jobs while hardback readers will pay just £10.77.
A crazy situation. But, if petitioning the government to abolish the tax won’t work – and it won’t – then what can campaigners do?
The short answer is that we must look to Europe. From January 2012, France will reduce its VAT on ebooks to 5.5% - the same rate it charges on printed books. In theory, France risks a fine from the European Commission for doing this. However, the Commission is already discussing the possibility of reclassifying ebooks so that they will no longer be taxable at the standard rate, as mentioned on the website of the European Federation of Publishers: http://www.fep-fee.be/.
In a speech on 21 November, Neelie Kroes, the European commissioner for the digital agenda, called for VAT on ebooks to be reduced, saying: “Isn't it just common sense to think that ebooks should benefit from the same reduced VAT rates as physical books?
“The legal regime – the EU's own, I admit – makes it illegal to do that. Personally, I find this very difficult to explain.”
This looks positive, but be warned: Ms Kroes is not leading the debate on the relevant laws. Instead, that job falls to taxation commissioner Algirdas Semeta. His priority, as detailed in the Commission’s consultation document here http://goo.gl/ysQlh, is not to grant VAT exemptions but to abolish them. This could even make things worse than they are now by threatening Britain’s current VAT exemption on printed books.
For any campaigners serious about closing the ebooks VAT gap, now is the time to act. But lobbying the British government to abolish the tax is useless.
Instead, we should petition the government to support VAT exemptions for ebooks at the EU level. Or the other option is to see whether France avoids censure from the Commission for lowering its VAT rate. If it does, then there would be mileage in petitioning the UK to do the same.
Meanwhile, we should talk to the European Federation of Publishers, a group that exists purely to lobby on issues like this, which appears to support such a change (see the link above). Lastly, we should also contact our local MEPs, most of whom will be more than happy to at least acknowledge our concerns. You can find an MEP local to you by going here: http://goo.gl/AY8M7 (click on the tab marked ‘Country’ to search for MEPs by region).
So, let’s stop directing all this fire at the wrong target and set our sights higher. That’s the only way anything is going to change for the better.
But these campaigners are wrong.
Don’t misunderstand me. Forcing readers to pay 20% VAT on ebooks is unfair, and, as regular readers of my posterous blog know, I’ve gone on record at the New York Times to say so: http://goo.gl/E09re. The thing is, petitioning the British government won’t work because the government cannot abolish the tax.
Don’t you think it would have done so already if it could? Look at Amazon, which has about 85% of the UK ebook market. Amazon.co.uk is tax registered in Luxembourg, where the VAT is lower, at 15%. This means that roughly 85% of all potential tax revenue from British ebook sales currently goes to Luxembourg. You think this is something the government wants?
Of course not. But the government’s hands are tied. All because it is bound by European Union law, which says that EU member states must charge VAT on ebooks.
Not only that, but each country must also charge their standard rate of VAT – which in Britain means 20%. As pointed out in this article http://goo.gl/GPZxZ, this means that ebook readers will pay £12.99 for the digital version of Walter Isaacson’s biography of Steve Jobs while hardback readers will pay just £10.77.
A crazy situation. But, if petitioning the government to abolish the tax won’t work – and it won’t – then what can campaigners do?
The short answer is that we must look to Europe. From January 2012, France will reduce its VAT on ebooks to 5.5% - the same rate it charges on printed books. In theory, France risks a fine from the European Commission for doing this. However, the Commission is already discussing the possibility of reclassifying ebooks so that they will no longer be taxable at the standard rate, as mentioned on the website of the European Federation of Publishers: http://www.fep-fee.be/.
In a speech on 21 November, Neelie Kroes, the European commissioner for the digital agenda, called for VAT on ebooks to be reduced, saying: “Isn't it just common sense to think that ebooks should benefit from the same reduced VAT rates as physical books?
“The legal regime – the EU's own, I admit – makes it illegal to do that. Personally, I find this very difficult to explain.”
This looks positive, but be warned: Ms Kroes is not leading the debate on the relevant laws. Instead, that job falls to taxation commissioner Algirdas Semeta. His priority, as detailed in the Commission’s consultation document here http://goo.gl/ysQlh, is not to grant VAT exemptions but to abolish them. This could even make things worse than they are now by threatening Britain’s current VAT exemption on printed books.
For any campaigners serious about closing the ebooks VAT gap, now is the time to act. But lobbying the British government to abolish the tax is useless.
Instead, we should petition the government to support VAT exemptions for ebooks at the EU level. Or the other option is to see whether France avoids censure from the Commission for lowering its VAT rate. If it does, then there would be mileage in petitioning the UK to do the same.
Meanwhile, we should talk to the European Federation of Publishers, a group that exists purely to lobby on issues like this, which appears to support such a change (see the link above). Lastly, we should also contact our local MEPs, most of whom will be more than happy to at least acknowledge our concerns. You can find an MEP local to you by going here: http://goo.gl/AY8M7 (click on the tab marked ‘Country’ to search for MEPs by region).
So, let’s stop directing all this fire at the wrong target and set our sights higher. That’s the only way anything is going to change for the better.
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