France withdraws plan for VAT increase on encrypted ebooks

The proposal was submitted to French National Assembly to target the large distributors of ebooks, e.g. Amazon, which put Digital Rights Management (DRM) encryption on their ebooks.  This means buyers may only use the ebooks on the distributors' hardware.  This is the Kindle ebook reader in Amazon's case.

This was viewed as excessive control of the market through vertical integration.  In general, France is making a number of attempts to curb the tax advantages of US internet giants, including Amazon and Google.  It has made a number of attempts to introduce a digital tax on these companies where they are able to sell to French companies ad services without being liable for corporation tax through non-resident trading.

The move comes as the European Commission has launched an ebook court hearing against France at the European Court of Justice.  The EC is seeking to force France to raise its VAT rate on ebooks to the standard VAT rate of 19.6%.  Whilst printed books enjoy the privilege of the reduced rate under the rules of the EU VAT Directive, this is not provided for on ebooks.  A similar case was launched against Luxembourg in September.  This follows a failure by the current Polish Presidency to secure a harmonisation of the