In July 2008, the Commission adopted a proposal for a Council Directive amending Directive 2006/112/EC as regards reduced rates of VAT. The proposal included a series of technical adaptations to the list of products and services for which reduced rates are allowed; one of these would extend the possible application to “audio books, CD, CD-ROMs or any similar physical support that predominantly reproduce the same information content as printed books”.
The proposal was welcomed favourably by the European Parliament, which on taxation matters only has a consultative role. The reception of the proposal in the Council was much more controversial, as unanimity was needed to reach an agreement and several Member States were opposed in principle to the use of reduced rates of VAT. The economic crisis also influenced the debates on the issue.
Finally, after a political agreement reached by the Council in March 2009, on 5 May 2009 Council Directive 2009/47/EC amending Directive 2006/112/EC as regards reduced rates of value added tax was adopted; it allows, among others, the application of reduced rates to books on all physical means of support. The Directive entered into force on 1 June 2009. As of May 2011, France, Hungary, Luxembourg, Poland, Portugal, Romania, Spain and the Netherlands have taken advantage of the new provisions to extend the reduced rates to books on all physical supports, while Sweden allows reduced VAT on audio books. In December 2010, France introduced new legislation allowing a reduced rate of VAT on all kinds of books starting from January 2012.
However, differences remain in the fiscal treatment of books with regard to their format (printed or electronic) and means of delivery (online or offline). In December 2010, the Commission issue a Green Paper on the Future of VAT, with the aim to launch a debate on how to reform the European VAT system. The Commission envisages a review of VAT to strengthen its coherence with the single market and its capacity as a revenue raiser by improving its economic efficiency and robustness whilst reducing the cost of compliance and of collection. The Green Paper – which includes a public consultation – points out, among others, the current inconsistencies in the VAT rates applied to comparable products or services; it highlights how, for instance, Member States may apply a reduced VAT rate to certain cultural products but have to apply the standard rate to competing on-line services such as e-books and newspapers.
In September 2011, the Economic and Monetary Affairs Committee of the European Parliament adopted a report on “The future of VAT”, following the Green Paper. In October, the EP adopted the report in plenary; it states that “all books, newspapers and magazines regardless of format should be treated in exactly the same way, which means that downloadable and streamed books, newspapers and magazines should be subject to the same VAT treatment as books, newspapers and magazines on physical means of support”. On 17th November 2011, the EP adopted a motion for a resolution on the modernisation of VAT legislation in order to boost the digital single market, which calls for eliminating the discrimination between VAT rates applicable to online and offline cultural products, with particular attention to books, and recommends the adoption of reduced rates of VAT for digital cultural products in general.
Following the results of the consultation, in December 2011 the Commission issued a Communication on the future of VAT – Towards a simpler, more robust and efficient VAT system tailored to the single market – while generally unfavourable to the use of reduced rates, the document recognises the need to address the issue of equal treatment for products which are available in both traditional and online formats and does not rule out the application of reduced rates in selected cases.
On 15th May 2012, the Council adopted a set of Conclusions on the future of VAT, in which it basically endorses the Commission’s position; the Conclusions do not mention the issue of discrimination of online and offline products but it accepts to consider the assessment that the Commission plans to do of the current rate structure.
As of January 2012, France and Luxembourg started applying reduced VAT rates to all kinds of books, regardless of the support.