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Pasty VAT joins UK ebooks in EU plans

  • Mar 31, 2012 | Richard Asquith

Pasty VAT joins UK ebooks in EU plans

As the UK government attempts to impose the full standard 20% UK VAT rate on heated food for take away, notably on popular hot pasties, this is becoming a big trend across Europe.

Over recent years, many of the 27 European Union member states have ignored attempts by the European Commission to impose full VAT rates on all goods and services. Whilst this condition is seen as a vital necessity in securing the proper workings of the EU-wide free trade market, guaranteeing the free movement of services and goods across borders, it more often creates odd twists and abuses in the tax system to suit local national preferences.

Some examples include:

  • UK retailers are forced to charge full VAT on ebooks and newspapers. In most other countries, member states have ignored this requirement, and instead oblige their e-retailers to only pay zero or a reduced VAT rate. For example, Luxembourg dropped the VAT rate on ebooks from 15% to 3% in January 2012. This has given Amazon’s Kindle a huge advantage since Amazon has now set-up its headquarters in Luxembourg to take advantage of this tax break. France has also now set its reduced VAT rate at 7% for ebooks and newspapers, to join Germany, again giving them a significant advantage over UK rivals.
  • Belgium peep shows recently came under scrutiny from the EU authorities. Many years were spent attempting to decide if they should be categorised as cultural cinematic events (6% reduced VAT) or as ‘automated recreational devices’ (full 21% Belgian VAT).
  • Poland was forced to raise VAT on babies’ clothing by the EU last year as it ruled it did not have the correct system in place when it joined the EU.

The EU has already put into place a mechanism to force all its member states to impose full VAT on most goods from 2013 – although this will require agreement.

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which won International Tax Review's 2020 Tax Technology Firm of the Year. Richard trained as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.