Wednesday, July 11, 2012

Here's why Amazon located its European operations in Luxembourg

Publishing Perspectives has a follow-up on the European Commission's launch of an "infringement procedure" against France and Luxembourg for offering lower VAT rates on eBooks than print. (Luxembourg's rates are actually the same for print and eBooks.) There are two issues with the European taxation system:
  1. VAT rates are all over the place, from a high of 25% in Denmark to a low of 3% in Luxembourg.
  2. eBook rates are generally much higher than those for print, for no good reason; for example, in Italy, the VAT on eBooks is 21%, but on print books it's only 4%.
The most logical approach would be to have an EU-wide VAT on books that covers both print and eBooks. Failing that, the next best approach would be for each country to assign the same VAT rate to both print and eBooks, as both Denmark and Luxembourg have done.

Here's a chart that illustrates the problem:

Source: Publishing Perspectives
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