VAT on ebooks

Have just written a letter to my MP, John Hayes:

Dear John Hayes,

I am writing regarding the price of ebooks (electronic books), and in particular their VAT status.

ebook readers, such as the Amazon Kindle, are getting more popular. People like myself find them more convenient than conventional books, easy to carry around, and without the storage issues that you would have with a room full of books. It could also be argued that they are good for the environment, as you don’t need to chop down trees to make an ebook.

However, one of the strange things about ebooks is that they usually cost the same as the paper version of the book – often more. This is despite there being no cost of mass-production, no distribution costs, and no warehousing required. Part of this is because – unlike conventional books – the publishers are allowed to dictate the retail price. But the more significant reason is that whereas conventional books are zero-rated, ebooks have VAT charged on them at 20%.

This anomoly has been raised quite a few times. It seems strange that if I were to buy a text printed on paper, I am not taxed, and yet if I buy the identical text in electronic form, I am taxed by a fifth of the cost again.

The reason I am writing to you about this is that Treasury Minister, David Gauke, has recently stated that it is the EU’s fault.

“Under EU law, VAT on electronic books must be charged at the standard rate,” he says, “Existing agreements with our EU partners do not allow the UK or other member states to introduce a new zero-rate or extend an existing one to relieve ebooks from VAT and they specifically exclude electronically supplied services, which includes ebooks, from a reduced rate.”

What puzzles me is that the French government have previously announced a plan for them to cut VAT on ebooks in France to a reduced rate of 5%. My understanding was that it was intended for this to happen in 2012.

Why do we think we are constrained by the EU, whereas France seems to think that the situation is more flexible than this?

May I take this opportunity to wish you, your family and your staff a very merry Christmas, and prosperous New Year.

Yours sincerely,

Chris Malme

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