Spain Hikes E-book VAT to 21%, Likely Slowing Growth

In Spanish World Book News by Julieta Lionetti

By Julieta Lionetti

Antonio María Ávila

The gap between print books and e-books has widened recently, since Spain’s Prime Minister Mariano Rajoy announced an increase in the VAT that affects e-books on July 11, among other unpopular austerity measures. Print books, on the other hand, continue to enjoy preferential status as “cultural goods,” maintaining a VAT of 4%. In what seems more like a privilege to a segment of the industry than to culture itself, theater, music and movies, together with e-books, will all be taxed at a rate of 21%, which will either cut profits or raise prices in an already depressed consumer market.

Antonio María Ávila, executive director of the FGEE (Federation of Spanish Publishers Guilds), was swift to state that the government had been “kind” to the book industry. He’s also convinced that the e-book VAT rate is a dispute to be solved by Europe as a whole, not a Spanish problem in particular. “Our battle is to get Brussels to consider e-books as books, because now they are judged to be a service,” he said, in a statement to the press. “It’s a very current matter that leads us down other paths,” he added, to underscore that as far as the Spanish authorities are concerned, the industry is satisfied — that is, a good deal for print books is enough.

Ernest Folch

Publishing has never been a monolithic industry and it’s difficult to speak in its name. Its ranks, professionals by trade in the subtleties of language and the permanent exercise of free-speech, might be mutinous and outspoken when in discord. While Ávila celebrated the government’s decision, native digital publishers and other e-book entrepreneurs set Twitter ablaze reporting their disappointment and fears.

“They are killing a business before it’s born,” says David Sánchez, co-founder and sales and content manager of 24symbols, a streaming platform with a freemium model. “The rise of the VAT rate beleaguers e-books’ profit-earning capacity, a capacity that is yet to be proven. On top of that, there are platforms selling in Spain but operating from Luxembourg, a tax haven where the super-reduced VAT rate for e-books is 3 percent, competing in this market will become ludicrous,” he says, in a clear reference to Amazon.

Ernest Folch, editorial director of Ediciones B and its digital imprint B de Books, fears that a higher VAT will disappoint and frustrate readers. “This measure is pernicious,”  he contends, and elaborates that “it will slow down sales in a newborn market that had just started to give signs of acceleration.” B de Books will not raise prices, as they plan to absorb the higher tax by cutting their profits, but not every publisher will be able to do so.

Cristina Fallarás

Cristina Fallarás, award-winning writer, journalist and director of Sigue Leyendo, is among those who can’t follow Folch’s example regarding the new VAT rate. “We are selling e-books for a euro. For us, it’s impossible not to transfer the increase to prices,” she explains. Blanca Rosa Roca, a publisher who has had both print and digital success with Roca Editorial and Barcelona eBooks, says that the new VAT rate on e-books is as outrageous as “taxing the age-old activity of reading.”

Folch brings the fearful specter of piracy into the room, to dramatic effect: “It’s also extremely dangerous because the first consequence will be the growth of piracy at a time of economic crisis. If e-books are more expensive, people will not stop reading, but they will seek new ways to access content.” At this turning point “the industry should not think that they’re off the hook because print books continue to enjoy the privileged super-reduced rate. The rise for e-books may mean slamming on the brakes at a crucial moment. What’s bad for digital will eventually be bad for print,” he concludes.

About the Author

Julieta Lionetti

Julieta Lionetti lives in Buenos Aires. She has over 20 years experience in the publishing industry. She works in Spanish, Catalan, French, English and Italian. She lived in France, Sweden and Spain.