Friday, 23 September 2016

More sloppy Euro-think: VAT on electronic books

  • debate about whether UKGov should remain a member of the European Economic Area; and
  • The dust still settling from the crazy decision of the European Commission against the Republic of Ireland re Apple;

the Advocate General of the Court of Justice of the European Union has thrown another mortar round into the toxic world of Euro-anything.

Reported by, the AG of the CJEU has confirmed that it is right to charge standard-rated value-added tax on electronic books while, at the same time, physical books may enjoy a reduced rate.

It is another clear example of classic, European disjointed thinking, seemingly a function of lobbying than of clear thought.

The issue is the usual issue for VAT.  When is a Jaffa cake a biscuit or a cake?  Answer: when the rate of VAT changes for absolutely no meaningful reason whatsoever, but where the state wants to engage in ‘tax fabrication’ (the opposite of ‘tax avoidance’).

In the case of e-books (standard-rated) versus real-books (exempt in UK; reduced-rate elsewhere), similar protectionist discrimination continues to apply.  If the rationale for reduced-rate VAT on books is to reduce the cost of education, then why charge a higher rate of VAT on e-books?  Why charge a higher rate of VAT on a form of book whose carbon emissions is arguably lower? (careful with this line of argument though; how many wind turbines are needed to power computers with which to read e-books?)

The ulterior motive is most likely that a reduced rate of VAT on paper books is a sop to the vested interest of the forestry and paper industries. These are powerful lobby groups in some countries, notably Finland.  So just as German taxi drivers sought to have their courts ban Über so as to reduce useful competition, another industry might quite like a relatively punitive VAT rate on their cheaper competitors.

It lends credibility to critics of the Single Market when they say it should have been called the Single Protectionist Zone.  Welcome to Europe!

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