One thing I completely forgot to mention in the post “Why is Europe lagging behind?” was the complexity of taxation for e-books in the EU. Here in Europe, we have this thing called Value Added Tax. Basically the value added tax is added to the price of the product and then the seller remits the tax back to the government. The difference to sales tax used in the United States is that the in VAT the consumer ends up paying the tax.
For historic and cultural reasons, printed books and newspapers have been granted a lower VAT rate in almost every EU member country. Here in Finland, for newspaper and magazine subscriptions the VAT has been 0%, where books have 9%. Ministry of finance has proposed that the VAT for newspaper and magazine subscription should be set to 9% as of year 2012. Some magazine publishers have to cope with this situation, some by laying off their staff. Google Translation for this finnish news piece is poor, but basically one major finnish magazine publisher has to layoff 80 people out of 500 because of this new increased VAT.
The strangest thing is somehow it has been decided in the EU that an e-book is “an electronically transmitted product”, which means that it is assigned a higher VAT than the printed version of the book. Below are examples of book taxation in some European countries:
|Country||Printed VAT||e-book VAT|
Personally I think it is ridiculous that basically the same product in different delivery method has been punished with higher taxation. Specially in value added taxation, where the buyer ends up paying the difference. No wonder consumers are complaining about the high prices of e-books compared to the printed counterparts.
I have not followed this issue too much lately, but The EU Director General for Education and Culture, Jan Truszczynski, has commented in the march of 2011:
We believe content should be taxed the same way, whether printed or in tablet.
I cannot agree more. Different book publisher organizations here in Europe have said for a long time that is an issue that needs to be tackled.
Just for curiosity I tried to find out information about how this is handled in the United States. Seems like there the problem is not the unfair taxation, but rather than the complexity, since sales tax can vary by county and municipality. So if Europe is lagging behind in e-book adoption, so are the tax rules on electronic products in this new e-commerce era where geographical location should not even matter that much.
I feel lucky that I am an engineer, not a tax accountant.