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A European Union court today ruled that it is not legal for countries to give tax breaks for sales of digital books.

The ruling came in a case involving France and Luxembourg, which had been sued by the European Commission for charging the same (low) tax on digital books as they do for physical books, according to the Wall Street Journal.

France charges a 5.5 percent value added tax for books (or VAT), while Luxembourg charges 3 percent VAT. Typically, their rate for VAT is 20 percent and 17 percent respectively.

EU law allows for a discount for physical goods, something particularly important to bookstores, which have seen their business hit hard over the past decade. France and Luxembourg were extending that same lower rate to e-books as well as physical books. But the Luxembourg-based EU court said that digital books are services, rather than goods, and therefore not eligible for the discount.

The ruling drew a swift response from the French government, which called on the European Commission to adopt new rules as part of the current efforts to create a single, digital market in Europe.

“France calls on the European Commission to make proposals as soon as possible within the framework of the strategy for the digital single market to introduce into European law a principle of neutrality allowing the reduced rate for all books,” said the statement.

Source: Wall Street Journal

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