Clare Daly (Dublin North, United Left)
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57. To ask the Minister for Finance further to Parliamentary Question No. 177 of 23 September 2014, if he will reconsider the position of taxing e-books at the standard 23% rate as of January 2015 (details supplied). [38364/14]

Michael Noonan (Limerick City, Fine Gael)
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As you will be aware, the VAT rating of goods and services is subject to the requirements of EU VAT law with which Irish VAT law must comply. In this regard, EU VAT law specifically provides that all digitised publications, including e-books, are treated as the supply of a service liable at the standard rate of VAT, which in Ireland is 23%.

The VAT charged on electronically supplied services was always the standard VAT rate, and is not related to the changes being made on 1 January 2015. The 2015 changes relate to the country in which tax is to be charged, and not the rate of VAT that is to be charged. From 1 January 2015, electronically supplied services, including e-books, will be liable to VAT in the country of the consumer and not the country of the supplier, as is currently the case. This means that an e-book purchased by a person in Ireland will be charged at the Irish standard VAT rate, and not the standard VAT rate of the Member State of the supplier. This is known as the destination principle, and it is designed to remove the competitive advantage gained by Member States charging lower rates of VAT; as under the destination principle a customer in Ireland purchasing an e-book from any EU Member State will be charged Irish VAT on that service.

As stated previously, while Ireland applies a zero VAT rate to printed books including atlases, children's picture, drawing and colouring books and books of music, by virtue of a derogation under the VAT Directive for such exceptional treatment, there is no option under EU VAT Law to either exempt e-books from VAT or to apply the zero VAT rate or a reduced VAT rate to such products.  The different VAT treatment of printed books and e-books reflects the nature of these products, the latter being a richer product often providing content beyond simple text to include embedded digital music, software, film and internet links.

In 2012, France and Luxembourg unilaterally made the decision to defy the well-established and recognised EU VAT position in relation to the VAT rate charged on electronic supplies of e-books, by applying a reduced VAT rate to these services. The EU Commission took both Member States to the European Court of Justice in 2013 because of this breach of law. A judgement in the case has not yet been made.  This is separate from the K Oy European Court of Justice Case C-219/13 which dealt specifically with the VAT treatment of printed and audio books, but did not deal with e-books.