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E-book readers attract unwanted VAT

Books are essential, but e-books are a luxury, apparently

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Many of those finding e-book readers under their Christmas tree have been surprised to discover that electronic titles attract value added tax, despite the dead-tree versions being VAT-free.

As the UK VAT rate returns to its pre-recession level of 17.5 per cent, owners of e-book readers are finding out that they have to pay it on electronic versions of books, for another 12 months at least and thereafter at the discretion of Her Majesty's government.

In the UK, most purchases attract 17.5 per cent tax at the time of purchase, but some things are exempt. Items deemed essential are sold free of VAT, and these include food, books and children's clothes. But electronic books aren't 'books' in the eyes of the law and so do attract the tax, until 2011 at least.

The problem with changing the regulations has always been the requirement for a unanimous vote at EU level, something rather more difficult than calculating the square root of -1. But last year it did happen, and member countries will be allowed to charge a reduced VAT rate on "any similar physical medium that predominantly reproduce the same textual information content as printed books", come January 2011.

Not only that, but the EU has made it clear that should any country choose to apply the reduced rate early it won't take action against them: a stance that has already seen Spain applying a lower rate - four per cent, the same as paper versions - to e-books.

There's even a petition you can sign, calling for prompt action to equalise VAT rates regardless of the delivery mechanism.

So what of our own treasury? Will British customers buying eBooks get to pay the lower rate next year? Apparently that hasn't been decided yet, and won't be until the next budget, until which time we'll just have to get used to paying tax for the luxury of electronic delivery. ®

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