The Curious Case of the EU and Ebooks
Simon Dunlop, CEO and Founder of Bookmate, discusses the possible implications of the EU's latest VAT ruling on ebooks.
The latest EU ruling which excludes ebooks from reduced VAT rates follows a long battle between the European Commission and two EU member states: France and Luxembourg. As it stands, paper books continue to qualify for reduced tax rates while their electronic counterparts are now subject to full VAT. This price increase for ebooks isn't just a blow to ebook publishers but a blow to the publishing industry as a whole.
The reasoning behind this decision rests on the EU's view that ebooks should be treated as an electronically supplied service, a definition which thus excludes them from the EU's list of goods and services which benefit from VAT breaks.
By treating ebooks separately from paper books in relation to VAT, the EU has revealed that it has little understanding of the publishing industry. VAT in EU states currently ranges from 18 to 25 per cent - meaning that the prices of ebooks will increase considerably. On the other hand, paper books in the EU will continue to enjoy a tax rate ranging from 0 to 10 per cent.
The growing popularity of ebooks has largely been a blessing to the publishing industry as it has encouraged younger generations to keep on reading despite the distractions of mobile gaming and social media. However, this move by the EU threatens to stall this growth, as understandably, consumers are not going to be happy paying extra for their favourite titles.
According to Amazon, lower priced ebooks have typically generated more revenue and royalties for authors than paper books. With ebook sales in Europe predicted to account for just over a fifth of book sales in 2017, it is clear the European Commission is playing a dangerous game. One of the reasons for the growing success of ebooks has been their relative cheapness, however, this hike in prices could arguably threaten to derail their swelling popularity.
Let's hope that in the coming months the bureaucrats in Brussels rethink this particular decision as it would be a shame to dampen one of the few areas of the publishing industry which is currently experiencing strong growth.