I Have Seen The Truth And It Doesn't Make Sense!

The EU changed the VAT regulations which apply to digital products on 1st January 2015. To those of us in the UK it meant a 17% VAT increase.

Previously we paid 3% on many Amazon digital products because Amazon shipped them to us via Luxembourg which applied their VAT rate of 3% - the lowest in the EU. From 1st Jan 2015 we were charged the VAT rate of the destination EU state rather than the supplier EU state. The UK therefore have to pay 20% VAT on digital products. (Ireland - 23%)

Does that seem bad? Instead of paying 3% to Luxembourg, we in the UK will be paying 20% to the UK. That means we pay more but at least it will be to our own country and perhaps it will mean we pay less in some other tax. Perhaps that makes some sense for music and video but there's one area where it makes no sense at all.

On January 1st 2015 the VAT rate on e-books changed too. The change affected all member states. The table at the right shows how the new rates affected e-book buyers in the rest of Europe. As you can see of the 28 countries in the EU five give e-books a special VAT rate. Ireland and the UK zero rate paper books.

In the UK the new rates mean a price rise of at least 17%. That doesn't seem a lot on an e-book which cost 77p formerly. They now cost 99p (a 29% price rise) but it's far more than inflation and a sharp contrast with the zero VAT rate on paper books.

Ask politicians and they'll tell you "Here in the UK, VAT is charged on e-books because they are a service."

Let's compare e-books with paper books and see how they compare:

Which of these is a service?

Paper books	E-books
Requires an author	Requires an author
Requires an editor	Requires an editor
Requires formatting	Requires formatting
Trees need to be felled (requires oil)	Not required
Timber needs to be transported to papermill (requires oil)	Not required
Papermill manufactures paper with some waste sludge (requires some oil)	Not required
Sludge needs to be disposed of (requires oil)	Not required
Paper needs transporting to printer (requires oil)	Not required
Ink needs manufacturing (requires oil)	Not required
Books need to be printed (requires oil)	Not required
Books need to be transported to distribution depot (requires oil)	Not required
Sales team need to visit retail outlets (requires oil)	Not required
Books need to be transported to retail outlets (requires oil)	Not required
Customer needs transport to bookstore and back (requires oil)	E-books are delivered direct to reader electronically.
Surplus unsold books need transport back to printer (requires oil)	Not required
Surplus requires storage or redistribution or pulping (requires oil)	Not required
Book pulp requires cleaning of toxic ink and disposal of the toxins (requires oil)	Not required

As you can see far more 'services' are required in the production of paper books than in the production of e-books. 

So:

• The EU and the UK have a declared aim of reducing carbon emissions, yet favour paper books which produce them at the expense of ebooks. It's been estimated that 95% of the carbon dioxide emissions could be eliminated by switching to e-books.
• The sludge produced by recycling books contains some particularly nasty toxins which are expensive to dispose of safely.

As for the reasons we are given for the 20% VAT charge in the UK -

I have seen the truth and it doesn't make sense!

Is there hope that VAT will be reduced for e-books? EC president Jean-Claude Juncker told the German newspaper association that the commission will next year consider the introduction of a reduced VAT rate for online books and digital newspapers. So - they consider this in 2016 and implement any change in 2017? Do you think that's soon enough?

So what can be done?