Taxation: UK's 20% duty on ebooks is manifestly unfair

Posted on by Mike Evans

The government has been challenged once more over the discrepancy between taxation treatment of paper books and ebooks. In a letter to The Times this morning, Alan Sinyor, a VAT expert at commercial law firm, Berwin, Leighton Paisner, makes a strong case for a revision to the rules. He reminds us that traditional paper books are exempt from tax while ebook are taxed at 20 percent. I have always felt that there is no logic in this, other than stubbornness on the part of HM Revenue and Customs. Sinyor explains the problem:

While it is true that Article 98 (2) of the European VAT Directive prohibits member states from applying a lower rate of VAT to e-books, there is no such prohibition on the UK applying zero-rating to e-books. Indeed, there is a robust argument that the UK is required to apply zero-rating to e-books, as the current mismatch between the VAT treatment of physical books and e-books breaches the fundamental VAT principle of fiscal neutrality. That principle requires the member states to apply the same VAT treatment to goods and services which are identical or similar from the customer’s perspective.

Physical books have always been exempt from VAT on the assumption that they are educational and therefore essential in promoting knowledge and improving the language skills of the population at large. This assumption must apply equally to ebooks unless I am missing something. The authorities cannot suggest that electronic books should be treated in the same way as music and other entertainment media. There is little perceived educational value in a music track. On the other hand, any book—even the trashiest of novels—has undoubted educational benefits in improving reading skills.

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