The European digital publishing industry is fragmented beyond belief. Every single member country has their own VAT rate on e-books and a massive loophole was closed that allowed foreign entities operating out of Luxembourg, driving prices up. There has been talk for a number of years about a single European market for e-books, simplifying the book selling process.
The European Union is the world’s largest economic entity, bringing together 28 countries into a single market that accounts for 20% of world imports and exports. When it comes to e-books though, Europe is hardly unified. France for example has a number of laws that prevent the discounting of e-books, due to laws that protect the traditional print industry and bookstores in general.
Selling e-books in Europe is challenging. Everyone used to be based out of Luxembourg and charged 3% VAT on e-books in every country in Europe. On January 1st 2015 the European Comission mandated that VAT will be payed based on where the buyer is located and not the seller. The United Kingdom, for example has a 20% VAT on e-books and the Irish Republic VAT is 23%. Germany charges 19% VAT, Luxembourg 3% VAT, Spain 21% VAT and Italy 4% VAT. Doing taxes on a business end are more complicated due to the different filing systems.
Can Europe ever be a single market when it comes to selling e-books? Well, it might happen sooner, rather than later. The European Comission revealed yesterday that it would hold an antitrust competition inquiry into the e-commerce sector in the European Union, as part of 16 initiatives on a digital single market to be delivered by the end of next year. As part of its inquiry, the EC will look at cross-border trade in digital content and the Book Sellers Association hopes it will study issues around accessibility and interoperability in e-books.
I think the commission is basically looking at e-commerce in general and how innovation on a political level is moving at a snails pace. E-books are just one small segment of a much larger issue. However, with these initiatives, the devil is in the details. The Commission must make sure it is protecting firms from the risk of additional burdens and unintended consequences stemming from new regulation.