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back to article EC tells Euro rebels: Hike up your ebook tax to 15%, or else

Luxembourg and France must stop applying a reduced VAT rate to electronic books because doing so distorts competition across the rest of the EU and is in breach of EU tax laws, the European Commission has said. The Commission said it had issued both member states with "reasoned opinions" formally requesting that countries change …

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The eLephant in the room

Because it's Luxembourg's low taxes on e-Books that are the biggest issue with Luxembourg's tax regime in Europe.

In any case how does this handle the iTunes store, because there's not much price consistency on its wares across Europe?

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Big Brother

Re: The eLephant in the room

What other issues are there with Luxembourg's tax regime??

Also

distorts competition

Because competition is "distorted" unless everyone is robbed equally with no escape.

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Re: The eLephant in the room

> What other issues are there with Luxembourg's tax regime??

Only that its standard VAT rate of 15% is the lowest in the EU, making it attractive for some businesses (e.g. Apple's iTunes) to be based there. (This doesn't work for businesses selling physical goods.)

Of course the difference between 15% and most other country's rates is quite small, so the difference is only useful if you're large enough that you can exploit significant economies of scale.

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Re: The eLephant in the room

The competition is suposed to be on the product price, not the tax price hence the distortion. Lowering the tax is not competing when others are, as they are supposed to, using the system fairly.

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Meh

You would think that in a recession the EU would demand that all countries lower the rate to the lowest country rate rather than the highest.

Oh I forgot how easy the EU find it to spend other people's money and then demand more and more.

EU=Money Pit

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Unhappy

Yes, funny how EU harmonisation means increasing taxes.

Services should be charged as goods (with the VAT for the destination country instead of the source country) and e-books should carry VAT as books in the destination country and things should be left at that.

Also worth noting that the EU mandating that intra-EU transactions carry the destination country's VAT instead of the country of origin's VAT is not as much of an incentive for countries to lower taxes. Doing so would allow the customer to pick and choose...

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LDS
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That's a classic case of regulations that can't cope with progress

This is the classic case of a stupid regulation made years before that can't cope with progress, and instead of changing the regulation to adapt to the new situation they attempt to enforce it in a silly way.

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Re: That's a classic case of regulations that can't cope with progress

I don't think it is a failure to cope with progress - it is applied to "electronic goods and services" in the article - but, as described, it is a failure of member states to apply the levies they themselves voted for and approved.

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Headmaster

Or

The EU could change its rules and have traders charge - and pay - the VAT in the country of use.

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Anonymous Coward

Re: Or

Cue the instant lobbying from big business because it will cost them X, Y, Z etc rather than the fact it will mean they cannot tax arb.

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Big Brother

Re: Or

Tax arbitration is a completely legit way to keep what's yours instead of giving it to the paper pusher superstructure. Only relentless statist propaganda always in need to "finance" their splurge expeditions (while actual services wither and decay in corruption and inefficiency) have the hoi polloi convinced otherwise.

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Re: Or

Amazon are already registered for VAT in the UK, for the sale of dead tree books where the UK has one of the lowest VAT rates - 0%, so it would just be a case of putting ebook sales on that VAT return rather than the Luxembourg return.

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Strange, I was under the belief that the EU/EC/EEC (strike whichever don't apply currently) had rules in place explicitly forbidding interferance in internal taxation of members! Looks like they may have lied (again) of course, if it is just for equality, they could say e-books are VAT free, then all would be equal, but as there would be less tax collected I am not going to hold my breath.

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Import duties are specified by the EU. VAT is subject to EU rules. Other taxes are the responsibility of member states.

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Stop

As pointed out...

Differential VAT is not the issue; charging VAT on ebooks when it is not charged on paper books is the issue. By requiring that VAT be charged, the EU is implicitly accepting that the book is not the content but the delivery method. I feel sure authors might take a different view (if fact, I know authors who do).

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Anonymous Coward

Re: As pointed out...

VAT *is* chanrged on paper books. The UK levies a 0% rate, France a 5.5% rate, etc., but it's still charged. And yes, I know that saying "charged at 0%" is not the same as "not charged" looks like sophistry, but it is the way VAT law is defined.

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This is a perfect example of where sense is not very common. It's not an electronically supplied service, it's a bloody book! Either all books should be VAT free or all of them should incur VAT. It's as mad as the pasty tax in UK.

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This is not a service

This is a perfect example where reality moves a lot faster than legislation and its interpretation. Reading a book in electronic form is so much better for the industry (It is much harder to share with a friend), is better for the environment (not cutting down trees), is greener (I don't have to drive to my local book store, neither does the sales assistant), etc etc.

So what does the "we must be green and save the planet" government do? Add VAT to the electronic version whilst keeping the dead-tree version tax free.

How many ways can you spell EPIC FAIL.

I would say that this government and the HMRC specifically could not organise a piss up in a brewery, but clearly that is what they must have done to come up so many daft, stupid ideas in such a short time.

Mine's the one with spoiled ballot paper in the pocket

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Re: This is not a service

'So what does the "we must be green and save the planet" government do? Add VAT to the electronic version whilst keeping the dead-tree version tax free.'

This is because the govt is not interested in saving the planet. It is interested in appearing to be green, and using this as a method to justify additional revenue streams.

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If the UK government cared about trees,

They'd have banned import of ash trees in 2009 apparently, and not now when the latest disease has arrived.

http://www.bbc.co.uk/news/science-environment-20107186

"The Chalara fraxinea fungus, which causes Chalara dieback."

But they jump at the chance to ban imports when they hear that German hens are laying funny shaped eggs. (I made that one up.) It's species-ist discrimination - or arguably kingdom-ist.

I'd have told them that I was going to go over last June, bring back a bunch of infected trees, and plant them in undisclosed locations, if they didn't do something to stop me. And if I saw any whales along the way, I would infect them as well. They probably wouldn't get sick but Japanese people might not want to eat therm any more.

In fact, I ought to find out Japanese people's favourite tree and any diseases that it gets, and infect whales with the diseases. I think it may be cherry.

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Facepalm

Re: This is not a service

You are fully aware that trees cut down to make paper are replaced after being cut down? That young trees soak up more carbon dioxide than old trees?

And of course we are all aware of how "green" Li-On batteries are to produce.

VAT is added to things that are deemed not to be "essential". eBooks are so far in that category, mostly because the vast, vast majority of books are still bought on paper. Until that fact changes, eBooks will remain a "luxury" item.

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Cherry flavoured whale

mmmmmmmm.

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Re: This is not a service

@I Am Spartacus: "Reading a book in electronic form ... is better for the environment (not cutting down trees)".

The trees used in paper manufacture are a crop, grown specifically for the purpose, so you should really say "better for the environment (not planting trees)".

Electronic books may save the energy used in producing and distributing paper books, but they will result in fewer trees, not more. Then again, the trees in question are hideous plantations of conifer, so they're no loss.

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Anonymous Coward

Force of history.

So what is there to stop Amazon, etc. selling & delivering ebooks from outside the EU, and telling brussels to go hang?

You would have thought that someone would have realised by now that sales tax on virtual items is a non-starter, and indeed on anything that can be sent via mail. In the end governments will have to do without it.

Starting by zero rating all ebooks everywhere, to match physical books, would be good move. Just ask the australian government what happens when you try to artificially inflate book prices.

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Anonymous Coward

Re: Force of history.

The EU demands that all distributors charge VAT on software downloads to Europe.

If Amazon wished to remain lawfully here they'd have to comply.

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Re: Force of history.

>So what is there to stop Amazon, etc. selling & delivering ebooks from outside the EU, and telling brussels to go hang?

EU law. If a business has a trading presence in an EU country, it has to charge the VAT rate prevailing in that country. Even if you bought your ebook from amazon.com, amazon.co.uk would be required to collect the VAT.

zero-rating would be nice, but AFAIK the UK is one of the few places in the EU which zero-rates physical books for VAT, so it's an uphill battle.

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Anonymous Coward

VAT on ebooks

The way I see it, VAT is charged on eBooks because there's no good way of distinguishing an ebook for other types of software, especially when you look at interactive books.

If there was no VAT on ebooks it wouldn't make sense to e.g. charge VAT on computer games - is an adventure game thst different from a interactive book? - and that would open a whole case of cans of worms where VAT on any kind of content wouldn't be OK.

Not defending VAT of course, just pointing out the issues.

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Flat VAT

Would solve a number of issues - and probably halve the number of employees needed at HMRC

The New Zealand experience was that going to a single tax rate from 5 different sales tax rates cut their staff requirements by 2/3, reduced tax take (more money in endusers pockets) was offset by far lower collection costs and far fewer opportunites for trader fraud (Although carousel fraud is rare there).

Good luck getting that one through though.

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Once again the EU fail to understand the meaning of competition

The EU needs to realise that they are not alone in the world. We live in the world of global trade. If countries want to exist in this climate then governments need to compete with one another. What the EU wants here is not competition and free trade, what they want is protectionism, I don't know about them, but when I voted, I was voting to join a free trade organisation.

Sure governments need to raise revenue to provide all the services we expect them to provide these days. But if a government works out that they can increase their overall tax income by lowering a rate of tax rather than raising it, then they should be free to do so.

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Anonymous Coward

Re: Once again the EU fail to understand the meaning of competition

having a tax regime that encourages the routing of ebook sales via certain countries is more akin to Flags of convenience for shipping.

the EU acts to remove barriers to free trade within its borders, which is what we got with an added political layer.

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Re: Once again the EU fail to understand the meaning of competition

But if Luxembourg decides that its sole product is low taxes then that is to the detriment of all the other EU countries where tax revenues disappear and are no longer available to provide services across the board.

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FAIL

The rules need to change so the same VAT rate is applied on e-book and the dead tree versions too.

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Mushroom

Scrap VAT, Scrap the EU and tell the whole lot of the money/time/space wasters to go away (this polite version took three attempts to get rid of the profanity)

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Pint

Next

I hope the EU will kill all Tax Havens within the EU. And tanj666, believe it or not, the EU is needed.

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Re: Next

The only "need" for the EU is to provide employment for tens of thousands of failed politicians and incompetent bureaucrats in a desperate attempt to be like the USA.

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Mushroom

eLephant in the room

Is that dumb tax law is bad tax law.

If you can't enforce it, you shouldn't legislate it. A tax on bringing a particular set of ones and zeros across the internet is a dumb law.

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