back to article Top Euro court ends mega ebook VAT slash in France, Luxembourg

Your Kindle purchases are about to get dearer following a decision by the European Court of Justice (ECJ) that France and Luxembourg can no longer charge a reduced rate of VAT for ebooks. Both France and Luxembourg set reduced rates of value-added tax for ebooks in 2012, and the European Commission took issue with this, hence …

  1. Anonymous Blowhard

    VAT Fraud!

    I assumed the zero-rating of VAT on books and magazines was intended as a measure to indicate we value knowledge and don't tax it.

    But it's paradoxical, VAT on blank paper is 20% whereas VAT on printed items (books etc.) is 0%; so it would appear that adding information to paper has negative value added?

    1. Lee D Silver badge

      Re: VAT Fraud!

      VAT is a luxury tax.

      Hence biscuits in general are not taxed, but chocolate ones are.

      Basic essentials aren't taxed (not completely true), optional luxuries are taxed.

      Also, don't forget, to actually USE an ebook, you require a VAT-liable "luxury", such as a smartphone or computer anyway.

      It's slowly getting out of date, yes, but VAT is not a tax on the lack of value to society. It's a tax on "luxury" items.

      When we can argue that Internet access is a legal necessity, then we can argue that PCs aren't a luxury, then we can argue that eBooks shouldn't be a luxury either.

      1. Anonymous Coward
        Anonymous Coward

        Re: VAT Fraud!

        @ Lee D

        A pensioner keeping warm in winter is a luxury ?

        1. Lee D Silver badge

          Re: VAT Fraud!

          I didn't make the rules, or claim they are perfect, and there are so silly exceptions.

          But all fuels and energy supplies are at a reduced rate of VAT. Plus, there are specific benefits that counter-act such things. So it's certainly RECOGNISED as not being a complete luxury or it would be at full VAT. Energy for business use is full VAT, for example.

          All gambling is exempt, for instance, but that's charged much more duty elsewhere. I believe that's an administrative issue where it costs more to mess about working out the VAT reliably than just making it exempt and charging other tax elsewhere on the same thing with something that's more easily calculated.

        2. Flocke Kroes Silver badge

          @Pensioners keeping warm

          I thought pensioners avoided VAT on heating by burning second hand books.

          1. Anonymous Coward
            Anonymous Coward

            Re: @Pensioners keeping warm

            @ Flocke Kroes

            ROFL +1

        3. ajsguinness

          Re: VAT Fraud!

          @ Mine's a Guinness

          Nope, that's why electricity and gas for domestic use are charged at a reduced rate of VAT of 5%...

        4. zaax

          Re: VAT Fraud!

          Heating at 5% VAT is only a quarter of a luxury

          1. yoganmahew

            Re: VAT Fraud!

            VAT reductions/exemptions also vary by country. Ireland has a similar regime to the UK where most essentials are exempt. Contrast with Germany where there are very few exemptions...

      2. Dan 55 Silver badge

        Re: VAT Fraud!

        France has already declared Internet access to be a legal necessity so that means e-book sales should be charged the same amount of VAT as book sales...

        https://en.wikipedia.org/wiki/Right_to_Internet_access#Ensuring_that_access_is_broadly_available_and.2For_preventing_unreasonable_restrictions

        Edit: You could read the book in a public library using Amazon's Kindle Cloud Reader so that's the computer problem sorted.

      3. Maverick
        FAIL

        Re: VAT Fraud!

        > VAT is a luxury tax.

        what complete and utter bollocks

        In the UK there are currently three rates of VAT: standard, reduced and zero **

        The luxury rate was abolished in 1979

        It is also a regressive tax (try reading up on this eh?), then reconsider if it is a "luxury tax", most people don't consider heating and getting things repaired rather than throwing them and buying new "luxuries"

        ** Exempt is not a rate

        1. Anonymous Coward
          Anonymous Coward

          Re: VAT Fraud!

          Pre-emptive: I do fully understand your argument. Joe earns £10,000 a year, buys something for £100 and pays £20 VAT, Bob earns £100,000 a year, buys something for £100 and also pays £20 VAT; the VAT paid is a smaller proportion of income and therefore regressive.

          However it's only really regressive if you do not consider that people with higher income consume more VAT rated goods, and ignore that not all goods are VAT rated. For example, Bob might use his increased income to use a less fuel efficient car, thereby paying far more in VAT per mile travelled than Joe. He might eat in fancier restaurants, or buy more processed food.

          Furthermore, the taxman has already had his share of Bob's income, that is what income tax is for. VAT is a tax on consumption and not income, so it is a straw man to define whether it is regressive or not in terms of income.

          Is it regressive in relation to consumption? No. Someone who consumes more, pays more, in a direct progression to the rate that they consume.

          VAT is by far my favourite tax, it is the only tax that is based solely on how much you consume, and many of the necessary things in life are exempt or zero rated. And yes, 'exempt' is a rate, as is "0%". See the government if you want to argue it further.

          1. The Mole

            Re: VAT Fraud!

            The flaw in your argument is that Bob is *generally* more likely to use his increased income to but a newer more fuel efficient car, whilst Joe is *generally* forced to by an old banger and therefore pays more VAT on the petrol he is using.

            That said I agree with you it is one of the better taxes, the biggest problem with it are the oddities in some of the rules that make it inconsistent and illogical (books vs ebooks being a prime example).

            1. Anonymous Coward
              Anonymous Coward

              Re: VAT Fraud!

              If that was the case, do you not think that Joe would use his car only for essential travel, and Bob would generally use his car more (and hence consume more).

              The argument is "why should Bob be able to use his car more?", and the answer is "because he has more money"; certain people don't like it like that, they think that Bob and Joe should have equal opportunity to consume despite their disparate incomes.

              1. Anonymous Coward
                Anonymous Coward

                Re: VAT Fraud!

                @AC

                I've yet to see shit defy gravity, except of course if you have some unfortunate accident while in space. The rich make the tax rules and they certainly don't make them for the poor.

                1. Tom 38 Silver badge

                  Re: VAT Fraud!

                  The rich make the tax rules and they certainly don't make them for the poor.

                  The tax rules (we call them laws) are made by parliament. Whether that is "rich" or "poor" depends on who you voted in. If we had had a Tory government for the last 36 years, that argument might have some merit, but at the moment the tax laws are largely those put in place by Labour.

                  If those were written in mind for the rich, some people got some splainin to do? Has Hodge been "shocked" yet that she had 11 years to change the tax laws in order to nail multinationals minimising taxes (like her family firm does), but failed each and every year?

                  1. Anonymous Coward
                    Anonymous Coward

                    Re: VAT Fraud!

                    @tom 38

                    Read this

                    http://www.huffingtonpost.co.uk/dr-simon-duffy/welfare-myth-poor-taxes_b_3053882.html

          2. Anonymous Coward
            Anonymous Coward

            Re: VAT Fraud!

            @AC

            Ah but Bob being a business man (or merchant banker) buys everything though his shell company and claims the vat back.

        2. Destroy All Monsters Silver badge
          Holmes

          Re: VAT Fraud!

          "VAT is a luxury tax."

          what complete and utter bollocks

          Downvoted for stating facts?

          The commentariat is even more outrageously retarded as usually.

          1. Tom 38 Silver badge

            Re: VAT Fraud!

            Downvoted for stating facts?

            He said more than the 5 words you are quoting.

            I down voted him for his pedantic stating that there is no such thing as an exempt rate of VAT, when there is.

        3. nijam

          Re: VAT Fraud!

          > It is also a regressive tax (try reading up on this eh?)

          In taxation, "regressive" is a politically-loaded pejorative term. Its only meaning is that people who hold certain political opinions are engaging in what one might call "stealth criticism". People of a different persuasion could equally readily describe it as a progressive tax, e.g. because it shifts the balance of taxation from production to consumption.

          Since all tax is essentially "demanding money with menaces" (as the law might say), it's of little significance anyway.

      4. Anonymous Coward
        Anonymous Coward

        Re: VAT Fraud!

        "VAT is a luxury tax."

        Well it might have been described like that when they introduced it, but the current rules (in the UK at least) are not logical at all. For example - children's clothes and footwear are taxed at 0%, whereas the adult equivalents attract the full rate. At what point during your transition from child to adult did clothing become a "luxury".

        There are loads of other anomalies. A bingo ticket is exempt, but energy-saving materials to insulate your house are taxed at 5%.

        So I'm not sure what policy the government is trying to pursue with VAT rates, but it definitely isn't rational.

  2. JDX Gold badge

    Your Kindle purchases are about to get dearer

    Does Amazon actually charge users 3% VAT, or do they charge 20% UK VAT and then pay back 3%?

    1. Destroy All Monsters Silver badge
      Holmes

      Re: Your Kindle purchases are about to get dearer

      1) Buy a book at Amazon

      2) Check the that nice slip of paper that comes with it (commonly called an "invoice" or "bill")

      3) ???

      4) 3% VAT

      You can't just charge the VAT rate you bloody well like.

      I would also like to see the EU-whatever-retardo-decision-group-of-the-week lovingly treated to a healthy dose of Zyklon B to tell them in no uncertain terms that Orwellianically deciding that people just don't pay enough to the loving, indispensable state for the privilege of buying a book is just not on.

  3. Phil O'Sophical Silver badge

    How do they determine the "downloading country" for this? My Kindle is registered with Amazon in the UK. If I'm lying on a mediterranean beach when I decide to download a book how do they work out whose jurisdiction applies? What if I'm on a French beach near the border and happen to have an Italian 3G connection at that moment?

    1. Lee D Silver badge

      "What if I'm on a French beach near the border and happen to have an Italian 3G connection at that moment?"

      Then the EU has recently seen to it that it will cost you more than the book's worth to do this, and they can tax that too.

      1. JDX Gold badge

        No, I get free 3G anywhere in the world. It's one of the wonderful features that is not that widely known, especially since you can use the free 3G for emergency web-browsing.

        1. Richard 12 Silver badge

          I luff my 3G Kindle.

          Even works in deepest darkest Peru :)

    2. Andrew Woodvine

      The network you're roaming on won't make any difference, as your data is tunneled back to your home network's GGSN anyway.

  4. maffski

    So the VAT changes that were supposed to hurt companies like Amazon, which actually just make it incredibly hard to self publish ebooks etc., prompting writers to instead sell through companies like Amazon, are now pointless? What's the betting they won't be cancelled.

    1. Mike Shepherd

      Writers

      The writers to whom you allude are presumably "struggling" (as the popular image goes) and hence unlikely to be registered for VAT, so VAT changes will not make it "incredibly hard" for them to publish their own material.

      1. VinceH

        Re: Writers

        Actually, the VAT changes do indeed do precisely that - because they now have to register for VAT in any EU countries into which they make any cross border sales; the threshold on this is zero.

        The "simple" alternative is to use the VAT MOSS schemes, but in order to do that they need to be registered for VAT in their own country. Here in the UK, a provision has been made for this situation - such people can register for VAT in order to use VAT MOSS, but not have to pay any VAT on domestic sales until/unless they reach the UK threshold, but they still have to correctly deal with VAT on cross border EU sales.

      2. Chris Evans

        Re: Writers

        Since the first of January the VAT threshold for selling digital downloads (ebooks etc) outside the UK but inside the EU is ZERO. Didn't you spot all the publicity about how absurd it is?

      3. Dave Bell

        Re: Writers

        The problem is that these small self-publishing businesses, under the old system, were not required to register for VAT in the UK. They were not big enough. The new system doesn't have that exemption. So they have to submit VAT returns, and the details required now for sales to the rest of the EU are difficult to obtain. There need, for instance, to be two distinct proofs of residence.

        It didn't help that HMRC didn't know about the businesses that were too small to register, because they hadn't registered, and didn't tell anyone about the need to register for VAT until the last minute.

        The extra admin work is expensive, and needs some major changes to the management. It may need a lot of changes to e-shop software, and I have not seen much sign of these changes appearing. The whole process appears to depend on a sudden and untested change in business computer software. It's not like the updates to income tax rates and allowances.

        I've done VAT returns, and it's not that onerous a process. It didn't need a major change in the records being kept. But that was all on paper, and all the details were on the invoices. The extra details that this new system requires are a lot of extra work and complexity, with a slipshod introduction process.

    2. Phil O'Sophical Silver badge

      So the VAT changes that were supposed to hurt companies like Amazon,

      It's impossible for a tax like VAT to hurt a company, since it is always passed on to the end consumer. When it comes to VAT, Amazon and companies like it are simply the tax collectors for governments.

      1. codejunky Silver badge

        @ Phil O'Sophical

        "It's impossible for a tax like VAT to hurt a company, since it is always passed on to the end consumer. When it comes to VAT, Amazon and companies like it are simply the tax collectors for governments."

        Tax is harmful full stop, the trick is limiting the damage while raising enough to provide the public services. Any tax on trade is going to hurt trade and amazon as a company does trade. We complain when businesses raise prices but to hike VAT is the gov raising other peoples prices.

      2. JDX Gold badge

        It's impossible for a tax like VAT to hurt a company

        >>It's impossible for a tax like VAT to hurt a company, since it is always passed on to the end consumer. When it comes to VAT, Amazon and companies like it are simply the tax collectors for governments.

        If it affects the end-price paid by the consumer, this can definitely affect sales.

      3. Destroy All Monsters Silver badge
        Holmes

        It's impossible for a tax like VAT to hurt a company, since it is always passed on to the end consumer.

        I don't know just how totally politician-level of utterly stupid one must be in order to not realize that upping the price towards the "consumer" (don't you mean "customer")? by 20% or thereabouts for no particular reason whatsover won't impact sales and thence "hurt a company".

  5. Tromos

    I suspect it is the billing address rather than the so-called downloading country that would be used. Too easy to spoof a download with a non-EU address and avoid the VAT altogether otherwise.

    1. Lee D Silver badge

      Indeed, the account's billing address (as verified by card) is likely to the be universal indicator.

      While in Italy last Christmas, a relative bought us a lot of Google Play credit.

      Because it was bought in Italy, we could only claim it on a Google Play account registered to an Italian address. And now we can't change it (without losing the credit), choose or download any movie for it without being in Italy, or use it to buy from anything but the Italian Google Play store.

      We told them that we very much appreciated the gift, and it SHOULD have been a wonderful idea, but not to bother next year.

      1. phil dude
        Linux

        contact google?

        Have you contacted google? I am simply curious how a $CURRENCY would not be converted like everything else in the Play store.

        E.g. $0.99 = 0.67p

        P.

    2. Chris Evans

      "I suspect it is the billing address rather than the so-called downloading country that would be used. Too easy to spoof a download with a non-EU address and avoid the VAT altogether otherwise."

      No. They want two non contradictory pieces of evidence. Some of the sales 'platforms' don't give IP address and some don't require the user to give a physical address. The address of the bank used to pay is one allowable piece of evidence (A lot of people seem to live in Luxumbourg!). PayPal refuse to give the IP address unless you use their API but if you are using a 'platform' you can't do that. And PayPal only give a physical address for registered customers.

      I know of people who have made sales who have no evidence of location at all, let alone two.You can't even use email address as some users have a .org email address and .com everyone knows can be anywhere.

      So all in all a right cock up!

      1. John_Smith

        "Some of the sales 'platforms' don't give IP address and some don't require the user to give a physical address."

        If it the service is sold through a platform is that a problem?

        If the platform operator sets the general terms and conditions, or authorises payment, or handles delivery/download of the digital service, the platform is considered to be supplying the consumer, and they are responsible for accounting for the VAT payment that is charged to the consumer.

  6. 9Rune5

    Viking VAT

    Roughly two decades ago the rules changed in Norway. Up until that point, VAT only applied to goods, not services.

    I find it wonderful that we (thanks to EU regulation) have come full circle: VAT now applies more to services than goods.

    In my opinion, European labor unions should focus on the tax system in the future. Rather than demand higher salaries, they should demand lower taxes. Specially in countries that practice progressive taxing. Labor unions should instruct their members to stand down whenever an elected official comes aknocking. Leave them stranded at airports (preferably someplace remote) and that kind of thing. (I mention airports, because in my country pilots earn hefty salaries and the progressive taxation should be a major concern for them too)

  7. cs94njw

    I'm more worried about this bit:

    "that eBooks constitute an “electronically supplied service” rather than “goods”

    Here you get into the problem of software licenses, etc, where you don't own the product, you're simply licensed to use it.

    1. calmeilles

      A book by any other name...

      HMRC took the view that e-books were "services" rather than books right from the start in the belief — now shown to be justified — that EU law as written pointed that way.

      Personally I'd rather consider the "value" of a book to be it's text and so a book would be a book regardless of the means of delivery and therefore rather approved the philosophical implications of the Luxembourg tax authorities initial decision even while recognising that it was a money motivated twist designed to attract Amazon and the like.

      1. JDX Gold badge

        Re: A book by any other name...

        You'd think in this age, they'd be trying to make paper books more expensive to promote environmentalism!

        1. DavCrav Silver badge

          Re: A book by any other name...

          "You'd think in this age, they'd be trying to make paper books more expensive to promote environmentalism!"

          Is it clear that paper books are worse for the environment than e-books?

        2. Dan 55 Silver badge

          Re: A book by any other name...

          Books were originally low/non rated (depending on the country) to...

          - promote literacy amongst the general population

          - keep the publishing sector happy

          Pick one or both.

          e-Books get a higher rate because...

          - it's a service not a physical object (as if that makes a difference with imparting ideas)

          - it keeps the publishing sector happy

          but basically you can make it up as you in along as you've just shown so don't give them any more ideas.

          I wouldn't mind if the tax were spent on something useful, but in most EU countries it's not.

  8. Anonymous Coward
    Anonymous Coward

    "Too bad for Amazon, eh?"

    No - to bad for consumers.

  9. Stevie Silver badge

    Bah!

    "Too bad for Amazon, eh?"

    Too bad for Amazon's customers, certainly.

    I though the EU was incentivizing "green" measures - like not harvesting trees for paper needlessly. Sounds like someone didn't get Le Memo.

    1. Destroy All Monsters Silver badge

      Re: Bah!

      Have you ever seen the containers of papers with official EU texts spewing forth from the printing presses? One could probably bury a small country in it.

      1. Dan 55 Silver badge

        Re: Bah!

        I believe that small country is called Belgium.

  10. veti Silver badge

    Using commas in place of "and"

    Irritating, pointless.

    Note to El Reg subs: this is online. You won't run out of ink.

POST COMMENT House rules

Not a member of The Register? Create a new account here.

  • Enter your comment

  • Add an icon

Anonymous cowards cannot choose their icon

Biting the hand that feeds IT © 1998–2019