VAT challenge on ebook prices

Posted on by Mike Evans

There is to be a welcome legal challenge to the British tax authorities’ inconsistent policy of levying 20% tax on ebooks while allowing physical books to be exempt.

Historically, books have been regarded as educational material and have not been subject to VAT. Electronic books, on the other hand, have always been treated in the same way as other electronic downloads and taxed. There is little logic in this anomaly.

The policy has further exacerbated the already unfair publishers’ policies which appear to make no allowance for the fact that ebooks cost virtually nothing to produce and distribute. Many newly converted ebook readers feel strongly that they are subsidising the printing, distribution and expensive display of traditional volumes. Many believe that printed books should be more expensive to reflect the greater costs involved and to help boost the adoption of downloads.

Now, leading City lawfirm, Berwin Leighton Paisner, is mounting a landmark case against HM Revenue & Customs. The firm argues that charging different rates on printed books and ebooks breaches European fiscal neutrality rules.

There is a danger in this, however. Highlighting the anomalous situation could push the government into deciding that ebooks and printed books should be treated in the same way and subjected to tax. However, if this did happen, publishers would then have little excuse not to reduce drastically the cost of ebooks.

by Mike Evans, 28 October 2012

∞ Permalink