Most EU countries, except Bulgaria and Denmark, allow paper books to be sold with discounted VAT rates. The average rate for paper books in the EU is 7.6%. It is considerably higher for e-books – standing at 19.9%.
The ruling ends years of confusion that came to a head when European Courts ruled against lowered VAT rates for e-books in France and Luxembourg. Andrus Ansip, the EU’s digital policy chief, called this “a message to us to intervene”.
The VAT measures announced today will allow but not require EU countries to apply lower rates for e-books, which currently make up only 5% of Europe’s bookselling market. The Commission predicts that will grow to a 20% share by 2021.
But e-book sales have already started to fall in some EU countries. The UK publishing association reported lower revenues from e-book sales in 2015 compared to the previous year.
Booksellers say they’re less optimistic about the growth in e-book sales, but hope that lower VAT rates could reverse the stagnating trend.
“VAT is probably one of the elements which might explain why the e-book market has been growing so slowly,” said Fran Dubruille, director of the European and International Booksellers Federation.
Dubruille says booksellers promote e-books mostly to cater to a small group of customers who prefer them, even though sales have floundered.
The Commission’s change to VAT rates for online publications will also affect digital news subscriptions.
“Whether you’re reading something on paper or electronically, a book is still a book and a newspaper is still a newspaper,” Pierre Moscovici, the EU tax commissioner, said today.
Moscovici said higher VAT rates for digital products are “no longer a reflection of the economy as it stands at the moment”.
The European Parliament has previously called for the Commission to allow lower VAT rates for e-books and online newspapers. MEPs and national governments will have to sign off on the executive’s proposal before it can become law.