(Updates with Luxembourg minister’s comment in fifth paragraph.)
Feb. 21 (Bloomberg) -- Amazon.com Inc.’s European base of Luxembourg as well as France face European Union lawsuits over their low value-added tax rates for e-books, which the EU claims hit sales elsewhere in the 27-nation bloc.
The European Commission is suing both countries in the European Court of Justice for breaching rules that ban reduced VAT rates for e-books, the regulator said in a statement today. Luxembourg charges 3 percent VAT on e-books and France 7 percent. The commission said they should charge the standard rate -- 15 percent in Luxembourg and 19.6 percent in France.
The low rates are hurting sales of e-books in other EU countries and creating “serious distortions of competition,” the Brussels-based authority said.
Amazon has its European headquarters in Luxembourg, allowing the world’s largest retailer to charge 3 percent on e- book sales. VAT rates on other items are charged in line with tax rates in customers’ home countries. Finance ministries and publishing industry groups have complained to the commission over “the negative effect on sales on their domestic markets” the low tax rates have, the commission said in the statement.
Luc Frieden, Luxembourg’s finance minister, said his government was pleased the EU’s highest court will rule on the issue.
“We actually welcome the decision to send the case to the EU Court of Justice so the court can tackle the question whether we have a modern Europe that supports e-commerce or whether it wants to punish e-commerce,” Frieden said in a telephone interview today. “This is a very important question for the future of Europe.”
Amazon’s press offices in the U.K. and the U.S. didn’t respond to calls and e-mails seeking comment. France’s finance ministry didn’t immediately respond to a call seeking comment.
As part of a revamp of Europe’s VAT system, the commission plans to make proposals by the end of the year to overhaul the different tax treatment of e-books and printed books. Any new rules would take effect in 2015, it said.
--With assistance from Stephanie Bodoni and Mark Deen in Paris. Editors: Peter Chapman, Jones Hayden