Tax Can Be So Taxing

When austerity is all around, many fundamental givens start to get reviewed and often what we all took as a universal practice may appear to be a luxury too far.

Books in Ireland have enjoyed a zero rate of VAT but as part of the country’s recently announced four-year plan this is now under threat. Digital book editions which are already subject to VAT at 21% but could now also face an increase to 23% by 2014. On page 97 of their economic plan they say, ‘The Government will also examine further rebalancing of the VAT system and zero rated VAT items within the context of wider and ongoing EU level consideration of the matter.’

The French Senate has opted to try to amend the 2011 draft budget and reduce VAT on e-books from 19.6% to the reduced rate of 5.5% enjoyed by print. It is envisaged that the lower rate would help develop legal downloads and should be applied to all cultural products sold online. So where does this leave the European Union which has very little unity on VAT rates on e-books?

Looking further afield The South Africa parliament appears ready to force Treasury to scrap VAT on books in a bid to improve levels of education in the country. This move could amend the Value Added Tax Act, removing the current 14% tax on books and result in a drop of R247million in state revenue.

So as that increase to 20% draws ever closer, where does this leave the UK who are also currently fighting sweeping library cuts?

A report by the Institute for Fiscal Studies (IFS) led by Sir james Mirrlees has made a number of sweeping suggestions as part of a review of the UK's tax and benefits system. Probably the most sensitive recommendation is that VAT should be extended to food, baby clothes and books. They claim that the zero rate of VAT is "an expensive and highly inefficient" way of helping people on low incomes.

The reviw chair and Nobel laureate, Sir James Mirrlees, said, "Some of the recommended reforms involve tweaks to current policy; others involve radical change and are probably for the longer term. It is undeniable that some of the proposed changes would be politically difficult. But failure to reform imposes enduring costs."

However, we can all breath easy as this is not a government review, nor are many of its other recommendations widely accepted today. In a global economy it is often hard to grapple with local taxation and what is even more harder to understand is the vast range of taxation applied to books, the difference of approach between physical and digital when the content is often identical and how a European Union can have so many different rates and approaches for the book.