Taxation of e-books: Commission takes the initiative

Our friend Magali Delhaye spotted this piece of information in today´s Europa Midday Express and thought it might be of interest-- which it certainly is, being related to an earlier IP Finance post, "European Commission looks to level the playing field -- and the "paying field"", which appeared here last week.

“Taxation: VAT on electronic books in France and Luxembourg

The European Commission is asking France and Luxembourg to amend their VAT rates on electronic books (e-books).

Since 1 January 2012, France and Luxembourg have applied a reduced rate of VAT to e-books, which is incompatible with the current rules under the VAT Directive. Under the Directive, e-books constitute electronically supplied services, and application of a reduced rate to this type of services is excluded.

This situation is creating a serious distortion of competition to the disadvantage of operators in the 25 other Member States of the Union, as e-books can be easily purchased in a Member State other than that in which the consumer is resident, and current rules provide for application of the VAT rate in the Member State of the provider rather than that of the customer. The Commission has received complaints from a number of Ministers of Finance highlighting the negative effect on book sales in their domestic markets.

The Commission is aware of the different treatment being applied to e-books and printed books and notes the importance of e-books. Under the new VAT strategy, the Commission has opened this debate with the Member States and should put forward proposals before the end of 2013 (see IP/11/1508).

In the meantime the Commission, as guardian of the treaties, requires Member States to respect the VAT rules they themselves unanimously approved.

The Commission has therefore issued reasoned opinions to the two Member States. This is the second stage in the infringement procedure following the letters of formal notice sent in July 2012 (). The two Member States have one month in which to bring their legislation into compliance with EU law. Otherwise, the Commission may refer the matter to the European Court of Justice. (References: IN/2012/2098 and IN/2012/4080). (for more information: E. Traynor - Tel. +32 229 21548 - Mobile +32 498 98 3871)”.

European business still investing happily in R&D -- but not in pharma

According to the European Commission's Joint Research Centre (JRC, "the European Commission's in-House Science Service"), leading EU businesses expect their investments in research and development to rise by an average of 4% annually during the period 2012 to 2014. This information comes from the 2012 EU Survey on R&D Investment Business Trends, which was published here today (thanks, Chris Torrero, for the link).

The results of this survey, which was carried out by the JRC's Institute for Prospective Technological Studies(IPTS) together with the European Commission's Directorate-General for Research and Innovation, are based on information from 187 of the 1,000 EU-based companies that were studied when the 2011 EU Industrial R&D Investment Scoreboard was prepared. According to the report:

"It is in the software and computer services sector that the expectations of growth in R&D investments over 2012-2014 are the highest, with an average of 11% per year. Like for most sectors, this is higher than the annual R&D investment growth rates observed on average over the 2007-2010 period. However, in the pharmaceuticals and biotechnology sector, the expectations for 2012-2014, at 3% per annum, are lower than the average rate observed over 2007-2010".

This blogger is hardly surprised at the unpopularity of pharma R&D investment. If he had any cash to invest, he'd plough it into the generic pharma sector, where risks are low, profitability high and it may be seriously questioned whether patents continue to offer any genuine incentive to invest. In contrast, Linux and open-source hardly qualify as a generic threat to software patents and copyright, though, which is presumably why investment is heading into the software sector and computer services sector.

A uniform transaction tax regime for the EU?

1709 Blog reader John Walker posted the following question as a comment on that blog, but it seems to me that it's more likely to receive an answer on this one. He writes:

"Australia used to have a very complex sales tax regime (for example the tax on tissue paper in a box was much more than the tax on the same tissue paper if wrapped around a toilet roll). Australia in the year 2000 introduced a uniform Goods and Services Tax (GST). GST largely replaced a complex and hard to see system, levied by both the Federal and the individual state governments, with a uniform tax levied at the same rate on every transaction. (there are some exceptions, but nobody's perfect)

Many of the EU's copyright' levies are transaction taxes; the nexus between the consent of a right holder and payment to the same right holder is clearly severed.

Doesn't the EU have any policy about aiming for a reasonably uniform transaction tax regime?"

Can any reader give John some assistance on this point?