French Gov't Rejects Plan To Tax DRM eBooks More Than Non-DRM eBooks

from the good-idea,-severely-flawed-targeting-and-execution dept

Tue, Nov 19th 2013 7:44am — Tim Cushing

For a moment, it looked as though France might utilize its tax system to make a point about how much DRM devalues electronic goods. A few months ago, an initiative surfaced seeking to amend tax laws in order to hit DRM-laced ebooks with a higher VAT. (Or, more accurately, lower the VAT on non-DRMed ebooks.)

A French deputy (Isabelle Attard) thinks that proprietary and DRM protected eBooks should not be legally considered books and should not benefit from the fiscal advantages enjoyed by books as cultural artifacts.

This is a good point, but this deputy's suggestion wasn't based on the ongoing removal of "first sale" rights by the addition of DRM. Rather, her amendment looked to target the largest purveyors of ebooks.

Arguing that the real problem was not a question of pricing, but rather the vertical integration of platforms like those of Amazon, Apple and Google, Attard proposed to address the problem by offering a fiscal advantage in the form of reduced VAT to sellers offering open books that consumers can read on any platform.

Although the targeting was off (and France's relationship with Amazon [in particular] can safely be described as "antagonistic"), the idea of punishing DRM-laden merchandise by hitting it with a higher tax rate appealed to many people, many of whom perhaps didn't share the same antipathy towards Apple, Amazon and Google.

Not that France wasn't already giving ebooks a cut rate on taxes. It's that this amendment would have excluded ebooks with DRM from that reduced rate, as Nate Hoffelder at The Digital Reader explains.

Under France’s [proposed] tax laws, DRMed ebooks will be taxed at a higher rate (currently 19.6%), while DRM-free ebooks will be taxed at the lower 5.5% rate.

[E]books are already sold in France with a 5.5% VAT, or value added tax, bundled into the list price. Technically that is illegal under current EU regulation; ebooks are defined as a service and thus should have a higher VAT applied. But no penalty has been applied (so far) so at this point it is really a matter of opinion.

Attard's rationale for the rate change tracks with the proper application of the VAT by differentiating between DRM-laced ebooks ("services") and non-DRM ebooks ("goods") based on what DRM does to a product.

“Yes, everything that goes against interoperability, or imposes reading constraints would be subject to a VAT of 19.6%, in the capacity of services, and not sale of a book, therefore of a product."

Unfortunately for anyone hoping France would open a discussion on the DRM issue, the amendment was shot down. Parsing this out from an iffy translation, the reasoning appears to be that while the French government feels it should make an effort to diffuse the power of "vertical markets" (Amazon, Apple, etc.), screwing with the VAT rate isn't the right approach. Furthermore, lowering the rate for non-DRM ebooks would likely subject the French government to further "condemnation" from the European Commission for "distorting" market activity.

In short: good idea, wrong tool.

But there's another factor in play as well. While Apple and Amazon sell many ebooks with DRM, they do so at the behest of publishers -- large publishers who would probably be none too thrilled to see any shrinkage in their market share thanks to a higher VAT rate, as a commenter at The Digital Reader pointed out.

[Y]ou can bet the major publishers, who license DRMed e-books for the most part and were caught unawares the first time, will not let it pass so easily this time round.

So, an amendment that targeted Amazon (the publishers' worst enemy, according to entities like the Authors' Guild) should have been the publishers' best friend, except for the fact that it targeted DRM, another of the publishers' best friends. (The enemy of my friend is my enemy, even if the enemy of my enemy is my friend?)

If the publishers did help get this amendment kicked to the curb, they're probably fine with it slightly benefitting Amazon as well. And as for Amazon, France is still hard at work pushing through legislation specifically targeting the online giant.

French lawmakers on Thursday took aim at Amazon to protect local bookshops by voting through a law that bars online booksellers from offering free delivery to customers on top of a maximum 5 percent discount on books.

Its rather telling that these actions have very little to do with protecting consumers and everything to do with protecting the status quo. The latest anti-Amazon law springs from a 1981 law passed to protect small bookstores from the encroachment of supermarket chains. Thirty years down the road, the same tactics are being deployed, which would indicate the past efforts haven't done much other than assure France's booksellers that they'll never have to make an effort to compete in the market, and that any detrimental effects of these laws will continue to be borne by French citizens.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: drm, ebooks, france, taxes, vat

10 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

This comment has been flagged by the community. Click here to show it

out_of_the_blue, 19 Nov 2013 @ 7:58am

Oh, it's the old "no tax break equals tax increase" lie.
A favorite of the more inconsistent variety of "libertarian" as they believe that if gov't doesn't effectively subsidize their pet project with special tax breaks not available to everyone, then it's tyranny.

And here, obviously Mike wants to promote Amazon.
Think the Internet means more competition? Take a look at the graph here: http://www.theregister.co.uk/2013/08/30/amazon_dot_com_holds_ludicrous_lead_in_online_retail_sales/
[ link to this | view in thread ]
Anonymous Coward, 19 Nov 2013 @ 7:59am

The one problem with trying to tax corporations is that they pass such taxes on to their customers. This trickle down till the public are paying the tax, and the cost of the administration by the corporations. The proposed change would only have had the desired effect is it switched sales of ebooks to platforms, publishers and authors who do not use DRM.
[ link to this | view in thread ]
Gwiz (profile), 19 Nov 2013 @ 8:14am

Re: Oh, it's the old "no tax break equals tax increase" lie.
Think the Internet means more competition? Take a look at the graph here: http://www.theregister.co.uk/2013/08/30/amazon_dot_com_holds_ludicrous_lead_in_online_retail_sales/

S o Amazon is the bad guy here? For what? Providing services that the consumers actually want, like one-stop internet shopping?

Amazon is a prime example of the underdog making it big time in a highly competitive market. What exactly is your beef with them? That they became TOO successful and now they need their wings clipped? Why?
[ link to this | view in thread ]
Anonymous Coward, 19 Nov 2013 @ 8:34am

Re: Oh, it's the old "no tax break equals tax increase" lie.
Remember when people called internet people basement dweller's?

Now those underground dwellers are 10 times bigger than any other business around them.

Even finance is being invigorated by those dwellers since they are the ones that probably will produce the next global currency.
[ link to this | view in thread ]
Anonymous Coward, 19 Nov 2013 @ 8:35am

exactly the same as the rest of the entertainment industries then. they are in the position, having bribed and corrupted politicians and courts into doing their bidding, and dont have to compete with any other services. as soon as there is a new kid in town, another load of lobbying is carried out, a new law comes in and the new kid gets sued out of existence! bang goes competition, up go prices that the customers have to pay!
[ link to this | view in thread ]
Zakida Paul (profile), 19 Nov 2013 @ 8:43am

Why must e-books be taxed at all? Here in the UK, e-books are subject to VAT while paper books are not. Not sure how it is everywhere else but this is ludicrous.
[ link to this | view in thread ]
Anonymous Coward, 19 Nov 2013 @ 8:48am

Re:
The one problem with trying to tax corporations is that they pass such taxes on to their customers. This trickle down till the public are paying the tax, and the cost of the administration by the corporations. The proposed change would only have had the desired effect is it switched sales of ebooks to platforms, publishers and authors who do not use DRM.

So.... its a free market still?
[ link to this | view in thread ]
Anonymous Coward, 19 Nov 2013 @ 8:58am

Re: Re:
That depends on whether you are just looking for a book to read, or looking for a particular book. If the need is fr an assigned book for education purposes, there is no choice in what you buy, and with DRM, no second hand market.
[ link to this | view in thread ]
John Fenderson (profile), 19 Nov 2013 @ 1:04pm

Re: Re: Oh, it's the old "no tax break equals tax increase" lie.
In all fairness, Amazon is a fairly unpleasant company. Not as bad as many, but still. Between their patent trolling, their treatment of customers & vendors, their attitude about privacy, and so on, it's best to avoid them.
[ link to this | view in thread ]
Fred, 20 Nov 2013 @ 3:08am

April, the main French Free Software advocacy association, has published a reaction :

http://www.april.org/en/electronic-books-france-no-differential-vat-based-presence-or-absence-drm
[ link to this | view in thread ]