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E-trade in books: fair approach by all EU member states


Debates have been among member states for long on VAT concerning digital “cultural products”, for example books. The new legislation will be introduced in EU on e-books' trade; presently the Commission intends to take some repressive measures against fraudulent states.

As is known, VAT taxation is not harmonized among the EU member states; there are several different rates for various goods and services, among them some with reduced VAT. Generally, the maximum VAT rate is 25% and the minimum varied from 3-5 to zero…

In e-trade for books some states –one-sidedly- reduced the VAT up to 3 per cent (e.g. Luxembourg). Companies in countries with 25% (as e.g. Denmark) moved their head office to Luxembourg thus making 22% profit. Another example, the British Amazon.com, which (if trade goes on in the UK) is subject to 20%, while moving trade to Luxembourg companies can earn 17% margin. Quite legally, so far…

The case against France and Luxembourg

The European Commission has decided to refer France and Luxembourg to the Court of Justice of the European Union for applying reduced rates of VAT to e-books. EU law is very clear on which goods and services are eligible for a reduced VAT rate. The provision of e-books is an electronically provided service and as such cannot benefit from a reduced rate.

Failure to comply with this legislation by France and Luxembourg results in serious distortions of competition to the detriment of traders from other EU member states. This goes against the basic principle of European tax policy: fair competition within the internal market. The effects of such unfair competition are felt in those member states that apply the VAT Directive correctly. Several Ministers of Finance and representatives of both the paper and e-publishing industries have voiced their concern on this subject and have pointed out to the European Commission the negative effect on sales of books on their domestic markets.

Commission refers France and Luxembourg to the Court of Justice over reduced VAT rates on e-books.

The reason behind the decision to refer the matter to the Court is the failure by France and Luxembourg to bring their legislation into line following the Commission's reasoned opinion of 24 October 2012.

Commission's opinion

One of the guiding principles of the ongoing revision of VAT rates is that similar goods and services should be subject to VAT at the same rates and that technological progress should be taken into account. The Commission is to make proposals on reduced rates by the end of 2013 under the new VAT strategy. Meanwhile, the European Commission is taking its role of guardian of the Treaties seriously by enforcing the rules of the Union.

Commissioner A. Šemeta, responsible for taxation said: ‘Questions concerning the tax treatment of physical books and e-books must certainly be tackled. And this is exactly what the Commission is doing as part of the wider review of reduced VAT rates. However, in the meantime, the Member States must play fair. Infringement of the VAT rules for e-books distorts the single market and runs counter to the fundamental EU principle of fair tax competition.'

Source: European Commission, Press release, IP/13/137, Brussels, 21 February 2013.


= More information on the case is available at: IP/12/740 and MEMO/12/794;

= For press releases on infringement proceedings in the areas of taxation and customs see:


= For the most up-to-date general information on infringement proceedings initiated against Member States, see:


= For more information on EU infringement procedures, see MEMO/12/12;

= On infringements in February 2013: MEMO/13/122;

= General reference: http://europa.eu/rapid/press-release_IP-13-137_en.htm?locale=en

Eugene ETERIS, European correspondent,
February 2013

№2(74), 2013

№2(74), 2013