By Jaroslaw Adamowski

WARSAW: In an unprecedented move, the Culture Ministers of France, Germany, Italy and Poland have jointly called on the European Commission to modify the European Union’s law to ensure that ebooks and paper books carry the same value-added tax (VAT) rate.

The latest initiative follows a recent ruling by the Court of Justice of the European Union (CJEU) which states that ebooks are not equal to paper books, and as such the same VAT rate should not apply.

“The digital era brings tremendous opportunities to the future of books and literacy, especially to foster reading among younger generations. Innovation in the book industry must be supported, as it is the only way the sector will be able to meet the readers and the creators’ evolving expectations,” the four ministers said in the joint declaration.

The document says that whether the book “is digital or printed, it is the content that makes the book, not the way the reader has access to it. A book is a book no matter what its form is.”

According to the four ministers, to foster innovation and secure the future of Europe’s e-publishing, technology-neutral regulations must be clearly asserted at the European level. The declaration was signed by France’s Fleur Pellerin, Italy’s Dario Franceschini, Poland’s Malgorzata Omilanowska, and Germany’s Monika Grutters.

“For the four ministers, the nature of the book relates to its content, and not to the manner in which it is accessed, and applicable taxation should respect the principle of technological neutrality” the French Ministry of Culture and Communication said in a statement.

The French government said that its decision to lower the VAT on ebooks in 2011 was designed to “ensure an equal fiscal treatment of books, as well as innovation in the field of distribution of culture.”

France, Luxembourg Forced to Raise Taxes on Ebooks

However, the move, and a similar decision by the government of Luxembourg, has resulted in an infringement procedure launched by the European Commission, and subsequent legal action taken by the CJEU. On March 5, the EU court gave a ruling in which it indicated that France and Luxembourg cannot apply a reduced rate of VAT to the supply of electronic books, in contrast with paper books.

“In France and in Luxembourg, the supply of electronic books is subject to a reduced rate of VAT. Accordingly, since 1 January 2012, France has applied a VAT rate of 5.5% and Luxembourg a rate of 3% to the supply of electronic books,” the CJEU said in a statement. “The Commission has asked the Court to declare that, by applying a reduced rate of VAT to the supply of electronic books, France and Luxembourg have failed to fulfill their obligations under the VAT Directive. In today’s judgments, the Court upholds the Commission’s action for failure to fulfill obligations.”

As a result, the governments of France and Luxembourg are required to increase the VAT on ebooks to 20% and 17%, respectively. The measure is to include all kinds of ebooks, including textbooks.

The EU court states that “ the VAT Directive excludes any possibility of a reduced VAT rate being applied to ‘electronically supplied services’,” and says that “the supply of electronic books is such a service … [rejecting] the argument that the supply of electronic books constitutes a supply of goods (and not a supply of services). Only the physical support enabling an electronic book to be read could qualify as ‘tangible property’ but such support is not part of the supply of electronic books.”

Moreover, the ruling recalls that the European Commission has criticized Luxembourg for applying a “super-reduced” VAT rate of 3%, as the EU’s VAT Directive prohibits member states from applying a VAT rate of less than 5%.