The European Court of Justice ruling that e-books don't qualify for lower rates of value-added tax (VAT) will have severe consequences for the book trade. We spoke to Vincent Montagne, President of Syndicat national de l'édition (the French publishers association) about the issue.
When is a book not a book? According to the European Court of Justice, when it's an e-book. The ECJ has ruled that e-books constitute an "electronically supplied service" and thus don't qualify for the lower rates of value-added tax (VAT) which print titles enjoy in many EU countries. In France, VAT on e-books could now rise from 5.5% to 20%, putting severe pressure on the book industry.
IPA: We’ve had the European Court of Justice ruling. What happens next?
Vincent Montagne: The European Commission, France and Luxembourg will enter into dialogue about how to rectify the situation (letter of intent and then reasoned opinion during a period of at least 2 months). Subsequently, if the Commission considers that a Member State has not taken the necessary measures, it will bring the matter before the Court of Justice a second time. If the Court confirms that the Member State has not complied with its first judgment, it may then impose a fine, which is generally in the form of a huge daily fine.
In the worst case scenario, the ECJ could take a new decision as early as the beginning of 2016. In this context, the SNE is raising the awareness of its members about the need to take a potential VAT increase into account in their annual forecasts.
What consequences would a VAT hike produce for France's e-book market?
As a reminder, the French e-book market is quite nascent in the trade sector (2.3% of trade publishers' revenues in 2013), but has substantial market share in the professional sectors. Consistent with our fixed book price legislation, e-book prices are fixed by publishers. One can imagine two kinds of consequences for publishers: either they increase prices, which will send a negative message to consumers who haven't yet adopted e-books; or they try to maintain the current prices but they will be discouraged from investing in this new market, due to its low demand and low return on investment.
What feedback have you had from the French government about the ruling?
France’s Ministers of Culture and Finance have called on the European Commission to make a legislative proposal to apply the principle of fiscal neutrality, i.e. the same VAT rules, whatever the medium may be. This idea could be proposed in the framework of the digital single market strategy to be released by the Commission next May.
The SNE has launched a campaign drawing attention to the ECJ ruling. What are its aims?
The SNE is organizing a viral campaign on a national and European level to rally readers’ support for low VAT on e-books, with the hashtag #Thatisnotabook. Supporting the campaign will allow the SNE and the French government to influence the European Commission and the economic and finance ministers, who could decide to amend the VAT directive (merely a technical measure). We hope to stimulate a Europe-wide movement: after Italy and France, other countries could join the cause.
The European Commission has signaled it may change VAT rules to allow e-books and paper books to be taxed alike. What can the publishing industry do to influence this process?
At European level, the publishers associations and their members along with the Federation of European Publishers (FEP) are lobbying hard on this issue. We keep on explaining that the reasons which justify a reduced VAT rate for print apply equally to e-books. We are pleased to observe that this cause, which fundamentally is about about access to reading, is not only supported by Europe’s whole book chain but also by the European Parliament ,whose President Martin Schulz has publicly tweeted his support for reform. But let’s keep up the momentum!
The French Publishers Association (SNE) is France's trade association of book publishers. It represents approximately 650 member companies whose combined business accounts for the bulk of French publishing and whose total turnover amounted to €2.6 billion in 2013 (€ 4.4 billion in retail selling price). For more information, please see http://www.sne.fr/enjeux/tva-sur-le-livre-numerique/