Thursday, January 27, 2011
eBooks Can Be So Taxing
A group of some 42 MPs have signed a House of Commons motion by Glagow Labour MP Tom Harris advocating the scrapping of VAT on ebooks. The premise of the motion is that the UK publishers are being held back by VAT levied on ebooks and this is being exacerbated by the increase of VAT from 17.5% to 20%. It claims that e-books in some other ‘jurisdictions’ are not subject to similar taxes and this places the UK at a ‘huge’ competitive disadvantage.
It’s an interesting development when UK physical books are VAT exempt and although seeking synergistic taxation on all books makes sense, citing other jurisdictions and inequality on ebook VAT makes little sense. Every country has its own VAT approach to both pbooks and ebooks and although the EU who would love to see some VAT harmonisation of a range of products and services we have to be careful what we wish for. Harmonisation could expose the position on physical books and is not guaranteed to do a lot as there are others who share a similar ‘disadvantage’. EU rules prevent member states from extending zero-rating but Harris wants the UK government to aim for that and in the interim lower the rate to the UK's permitted reduced rate of 5%.
We should remember that we are talking English language books and therefore the comparison should be the US, Australasia etc not Europe. It could be argued also that currency exchange also can place some at advantage, or disadvantage and there is little we can do there. We should also recognise that we have to clarify exactly what is a book, a digital service, or multi media and we look forward to that challenge.
So we find ourselves asking exactly what is the point of all this huff and puff? Is it about disparity in tax, harmonisation of VAT, the increase 2.5% increase, promoting reading or MP trying to do his best for his constituent?
Interestingly, we could see an argument based on counter balancing the library closure programme with a reduction of VAT to promote reading but some would suggest that may prove equally taxing to get across.