Lower sales tax only for print not for e-books, EU court rules

BRUSSELS (Reuters) - European countries must levy standard rates of sales taxes on digital books and newspapers rather than the reduced levels possible for their printed equivalents due to e-commerce rules, the EU’s top court ruled on Tuesday.

The European Court of Justice was called to interpret EU rules on value-added tax (VAT) after Poland’s commissioner for civic rights questioned whether the system of allowing lower rates only for printed publications was fair.

The court said the rules allowed EU countries to apply reduced VAT rates to printed but not digital publications even though both met the European Parliament’s objective when passing the VAT directive - the promotion of reading.

The court reasoned that the exclusion of reduced rates for digital books was the consequence of a specific VAT regime for e-commerce for which clear and uniform rules needed to apply.

The EU’s 28 member states could therefore not be allowed to apply lower sales tax to e-books.

“(It) would effectively compromise the overall coherence of the measure intended by the EU legislature, which consists in the exclusion of all electronic services from the possibility of a reduced rate of VAT being applied,” the judges said.

The European Commission last year proposed changes to the rules to allow countries to align sales taxes for digital and printed publications, part of a wider plan to give EU states greater powers to set VAT rates.

Reporting by Waverly Colville; editing by Philip Blenkinsop and Susan Thomas