VAT on e-books

In my other job as accountant, I've recently been involved in examining in detail the VAT rules for the travel sector, where the EU is desperately trying to harmonise the taxation rates across its member states.

Much like travel, VAT on books is also charged at different rates in different countries.

In the UK e-books carry 20% VAT while print books are free of tax. In France e-books have 5.5% VAT, while in Luxembourg where Amazon is based, the VAT is charged at 3 percent.

This week, however, according todays Bookseller magazine, the European Council is going to debate the issue, with the aim of harmonising VAT on e-books across Europe.

Related to this issue is a new law coming into force in 2015 where VAT has to be charged on the level of the rate in the country where the book is sold, not in the country where the e-store is based. This will make pricing decisions more complicated for us indies, but, on the other hand, if the UK becomes VAT free for e-books, it will also reduce the price of the books for our readers.

Here's hoping that the European Council will come to the right decisions for us, and that e-books will in the future be charged at 0% rate VAT, to make them equal to print books. Because, even if e-books are generally cheaper than print books, surely there is absolutely no reason to charge VAT on the digital content if the print copy doesn't carry it?

Here's a link to The Bookseller article for those who are interested in these matters.

VAT on e-books - what the?

Now this is a subject where my two worlds collide - VAT on books. Both my Accountant's and indy writer's interests were alerted when I read today in The Bookseller about the latest news on this strange taxing anomaly.

There's no VAT on books, is there? I hear you enquire. That's right, there isn't, unless these books are in digital form, in which case, in their infinite wisdom the HMRC have decided they need to charge the consumer 20% on their reading pleasure. (As if we struggling indy writers didn't have enough troubles on our plate.)

The Englishman costs £1.91,
with zero VAT it'd cost just £1.59

There is a very small glimmer of hope in this area, however. A law firm, Berwin Leighton Paisner believes that they can take the HMRC to task on charging different rates of VAT on the same reading material. Their case will be heard in mid 2013.

But it's not as simple as that.

HMRC have publicly claimed that if they have to change the VAT on e-books they will also have charge VAT on physical books. In other words, parity will mean VAT would be charged on all books, whether digital or physical. Obviously no-one wants this.

The tax man has pointed out that it's illegal under the European Court of Justice to extend UK's scope of zero-rated VAT. But the lawyers BLP argue that removing 20% VAT from e-books means that the Government would only apply an existing concept (of zero rated VAT) to a new technology product in the same category.

I sincerely hope that BLP win their case and 20% VAT is removed from e-books. To me, as an accountant and a novelist, it makes no sense at all to charge VAT for one but not for the other.