UK VAT at 20%: Book tax anomaly punishes e-book buyers
If you buy a dead-tree book in the UK (the one that wastes paper and needs expensive distribution) you pay no sales tax. But if you download the same book electronically (the version that is essentially carbon neutral) you pay 17.5% tax. And on January 4 this rate rises to 20%*. This is decidedly unfair and has the potential to influence the market in favour of wasteful paper books.
If the British tax authorities were logical (which they are anything but) they would recognise that the incentive should be the other way round. Downloads, which do not in any way harm the planet (other than the minute amount of electricity used in the process) should be cheaper than real books. Of course, there would be outrage if it were suggested that the solution were to remove the zero-rating status from dead-tree books in order to achieve a level playing field. So why not simply include e-books in zero rating accorded to other books and newspapers?
Currently, as I said in my post yesterday, buyers of e-books and electronic newspapers are already subsidising the wasteful individuals who prefer to buy a physical copy. I maintain that those who buy paper books, magazines and newspapers should be the ones to pay the premium while electronic downloads should be dramatically cheaper.
* Value Added Tax (VAT) is imposed throughout the European Union but individual governments may vary the rates within various guidelines. 15% is the European mimimum for the standard rate but all countries tinker - either by zero-rating various categories or by imposing higher rates on luxury goods. In Britain VAT was introduced at 8% to replace the purchase tax system in 1973 when the country joined the EU. In 1991 it rose to 17.5% and has remained at this level until now (with a brief period of 18 months in 2008/9 when it was temporarily reduced to 15% as a boost to the economy). On January 1, 2011, it will rise permanently to 20%, which is more in line with the rates in the majority of EU countries. Books, children's clothes and groceries are among categories that are zero-rated in the UK. Electronic books are lumped in with music and other downloads as taxable items.