Press Release: Taxation: Commission refers France and Luxembourg to the Court of Justice over reduced VAT rates on ebooks

The European Commission has decided to refer France and Luxembourg to the Court of Justice of the European Union for applying reduced rates of VAT to ebooks. EU law is very clear on which goods and services are eligible for a reduced VAT rate. The provision of ebooks is an electronically provided service and as such cannot benefit from a reduced rate.

Failure to comply with this legislation by France and Luxembourg results in serious distortions of competition to the detriment of traders from other EU Member States. This goes against the basic principle of European tax policy: fair competition within the internal market. The effects of such unfair competition are felt in Member States that apply the VAT Directive correctly. Several Ministers of Finance and representatives of both the paper and epublishing industries have voiced their concern on this subject and have pointed out to the European Commission the negative effect on sales of books on their domestic markets.

One of the guiding principles of the ongoing revision of VAT rates is that similar goods and services should be subject to VAT at the same rates and that technological progress should be taken into account. The Commission is to make proposals on reduced rates by the end of 2013 under the new VAT strategy. Meanwhile, the European Commission is taking its role of guardian of the Treaties seriously by enforcing the rules of the Union.