July 3, 2012 / 5:01 PM / 6 years ago

EU sues France, Luxembourg over low VAT on e-books

BRUSSELS, July 3 (Reuters) - The European Union’s executive began legal action against France and Luxembourg on Tuesday for applying reduced tax rates on the sale of electronic books, something it said was incompatible with EU rules.

Since January, France and Luxembourg have applied reduced value added tax (VAT) rates to the sale of e-books of 7 percent and 3 percent respectively. Under EU rules, governments are allowed to apply reduced VAT rates to a limited list of goods and services which includes books, but currently not e-books.

“This situation creates serious distortion of competition to the detriment of operators in the other 25 member states, as electronic books can easily be purchased in a member state other than the consumer’s country of residence,” the European Commission said in a statement.

E-books are digital publications designed to be read on mobile and other electronic devices such as Amazon’s Kindle or Apple Inc’s iPad.

The Commission has said it will consider the possibility of including e-books on the list of goods eligible for reduced VAT, but it does not intend to make legislative proposals until the end of 2013.

France and Luxembourg each have a month to reply to the Commission and justify their rules. If the bloc’s executive is not satisfied with the response it could take the countries to the European Court of Justice, which could ultimately lead to the imposition of fines.

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