EU gives Amazon a bloody nose

[MartinC]

http://m.guardian.co.uk/ms/p/gnm/op/...cat=technology

Rather more of a surprise...

[murraypaul]

I think this was expected. Luxembourg's action in lowering their VAT rate just on eBooks is not allowed under EU treaties. (Countries are allowed to have different VAT rates for different classes of products, but they are not allowed to redefine what those product classes are.)

[fjtorres]

A bit of spin there.
First, because the fight is between Luxembourg (and France) and the Brusselcrats.
Second, because despite all the "Amazon" whining there are dozens of companies doing the same thing.
Third, because nothing has actually happened. There is not going to be any change for months or years.
Fourth, because even if it were to change it'll only change to 15% at most.
The most likely outcome is that at some point in the future they'll set a new rate for digital media; it might be 3%, it might be 7%, or it might be 15%. Or something in between.
But, consdering how fast EU institutions negotiate these issues it could be the next decade before anything actually changes at the consumer level.

[frahse]

Originally Posted by fjtorres

A bit of spin there.
First, because the fight is between Luxembourg (and France) and the Brusselcrats.
Second, because despite all the "Amazon" whining there are dozens of companies doing the same thing.
Third, because nothing has actually happened. There is not going to be any change for months or years.
Fourth, because even if it were to change it'll only change to 15% at most.
The most likely outcome is that at some point in the future they'll set a new rate for digital media; it might be 3%, it might be 7%, or it might be 15%. Or something in between.
But, consdering how fast EU institutions negotiate these issues it could be the next decade before anything actually changes at the consumer level.

So you expect no change until the EU is in total fiscal ruin and anarchy, and the smoke from the next "war to end all wars" has dissipated?

[fjtorres]

Originally Posted by frahse

So you expect no change until the EU is in total fiscal ruin and anarchy, and the smoke from the next "war to end all wars" has dissipated?

The Euro crisis is a *real* threat to the EU and in three years they've done a lot of talking and very little doing. And they haven't even begun to address the *bigger* threat of the banks' toxic assets.


Talk and posturing tends to substitute for action more often than not in Brussels.
(Just ask the colluding price fix six.)

[jgaiser]

I always think the U.S. Congress is a mess, until I start paying attention to what's happening in Europe. It's a wonder anything useful gets done.

[Kali Yuga]

Originally Posted by fjtorres

the fight is between Luxembourg (and France) and the Brusselcrats.

The issue drew attention because of Amazon's behavior -- much in the same way that they were not the sole beneficiaries of discrepancies in sales tax policies in the US, but still drew most of the attention in that matter.

Plus, Amazon is apparently contesting the ruling.

Originally Posted by fjtorres

Second, because despite all the "Amazon" whining there are dozens of companies doing the same thing.

Sure. But how many of them are retailers who are forcing UK publishers to pay 20% VAT, when they're only kicking back 3%?

Originally Posted by fjtorres

Third, because nothing has actually happened. There is not going to be any change for months or years.

Luxembourg apparently has 30 days to comply. Someone's pushing for an aggressive schedule.

Originally Posted by fjtorres

Fourth, because even if it were to change it'll only change to 15% at most.

3% to 15% is a pretty good boost. The UK might drop their rate from 20% to 15%, but since the EU is also pushing France to increase their VAT, it sounds like 15% will be it.

Amazon got busted for exploiting a tax loophole, and pushing publishers to pay more VAT than they collect. The EU is now trying to close the loophole. So what's the "spin?"

[CommonReader]

I fail to see how Amazon has any legal standing to contest the ruling. Legal standing has been denied by the ECJ in far more clear cut cases. Challenges to tax decisions usually also don't stay the requirement to pay unless there is a specific court ruling to that effect.
This advantage will end in 2015 anyway, as from then on the VAT regulation of the country of the buyer will determine the VAT liability.

What we do see here quite clearly are the parasitical policies of some smaller member states of the EU who are setting up themselves as corporate tax havens, though.

[murraypaul]

Originally Posted by Kali Yuga

Sure. But how many of them are retailers who are forcing UK publishers to pay 20% VAT, when they're only kicking back 3%?

The publishers aren't paying VAT.
I think you mean that they were setting prices and retailer/publisher split on the assumption that the customer would be paying 20% VAT.
(Which was probably true at the time the contracts were signed, it is only in the last year of so that Luxemburg introduced the lower 3% rate.)

Amazon got busted for exploiting a tax loophole, and pushing publishers to pay more VAT than they collect. The EU is now trying to close the loophole. So what's the "spin?"

"Amazon got busted" is the spin.
No they didn't. It is nothing to do with Amazon.
Luxemburg got busted for failing to comply with EU taxation agreements.
Amazon is one of the many companies (including Skype and Netflix according to the Guardian article) who took advantage of the lower rate.
And it is Luxemburg (and other countries) who will appeal the decision, not Amazon.

Edit: The actual statement of the commission:

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).

Edit: A similar proceeding not relating to eBooks:

Reference: IP/12/676 Event Date: 21/06/2012
VAT: Commission requests UK to amend its rules on reduced rates

The European Commission has asked the United Kingdom to amend its legislation which allows a reduced VAT rate for the supply and installation of "energy-saving materials". This measure goes beyond the scope allowed under the VAT Directive.

Under EU VAT rules, Member States can only apply reduced VAT rates to a limited number of goods and services, which are clearly listed in Annex III of the VAT Directive. This list does not include the supply and installation of "energy saving materials". Therefore, the UK's application of a reduced rate in this area contravenes EU legislation.

The request takes the form of a Reasoned Opinion (the second stage of an infringement procedure). If the legislation is not brought into compliance within two months, the Commission may refer the matter to the European Court of Justice.

[Kali Yuga]

Originally Posted by murraypaul

The publishers aren't paying VAT....

Amazon is forcing publishers to discount their products based on the idea that Amazon is paying a 20% VAT. I.e. it's coming out of the publisher's cut.

The phantom VAT charge is going into new contracts. And it's not just the Big Bad Publishers, but small ones as well.

Amazon is also forcing publishers to sign a "most favored" status -- i.e. no one is allowed to get a better discount than Amazon. Many people regard this as anti-competitive behavior -- oh, wait, that's only when the publishers are the ones pushing that requirement. Never mind.

Oh, and Amazon also hasn't paid any corporate tax in the UK for the past 3 years, despite selling £7.6 billion in goods. An investigation into this started back in April.

Yes, Amazon is not alone in exploiting the complexities of the EU tax structures. I'd also say they probably haven't violated any laws, or at least are trying to pay as little tax as possible without intentionally violating any laws.

But obviously Amazon's behavior has drawn the attention of the EU to this particular issue, and they are busted for dodging taxes and bullying their vendors. And you're only fooling yourself if you believe this has "nothing" to do with Amazon.

[murraypaul]

Originally Posted by Kali Yuga

But obviously Amazon's behavior has drawn the attention of the EU to this particular issue, and they are busted for dodging taxes and bullying their vendors. And you're only fooling yourself if you believe this has "nothing" to do with Amazon.

Amazon is the reason other companies complained so loudly, but has nothing to do with the commission decision, which was inevitable, Luxembourg's actions are not permitted.

[fjtorres]

Luxembourg has 30 days to answer. Then the commission will take 30 months to deliberate.

[Fbone]

Originally Posted by fjtorres

Luxembourg has 30 days to answer. Then the commission will take 30 months to deliberate.

By then it will be 2015 and it would no longer matter.