Higher Sales Tax on E-Books OK With EU Judge

     (CN) — A European court adviser said Thursday that charging the full value-added tax rate on digital books — and not the reduced VAT rate that printed publications enjoy — does not violate EU rules on equal treatment.
     Advocate General Juliane Kokott’s opinion for the European Court of Justice comes in response to a question by the Polish Constitutional Court, which is hearing a challenge of the different VAT schemes.
     Specifically, the Polish court questioned whether the European Parliament was sufficiently involved in the rulemaking process of allowing reduced VAT on printed materials but demanding the full amount on digital books, magazines and newspapers since, on the face of the it, digital and printed books are not being treated equally.
     In her 13-page opinion for the EU high court, Kokott said that digital and printed books cannot necessarily be compared since lawmakers have to contend with different levels of competition distortion between the two formats. Accordingly, deciding which VAT scheme to apply to print versus digital books belongs with legislators and not judges, Kokott said.
     Kokott also noted that print and digital books have very different distribution costs, and therefore different needs for government support. This justifies the difference in VAT treatment, the adviser said.
     Furthermore, a reduced VAT on digital books published on physical media like CD-ROM does not amount to unequal treatment either since publishers must charge higher prices for those products than they might for purely digital material sent electronically, Kokott said.
     The adviser’s opinion is not binding on the European Court of Justice, which has begun its own deliberations in the case. However, the high court found in 2015 that France and Luxembourg violated EU law by charging reduced VAT on e-books — fully upholding lawmakers’ tax decisions.

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