Under the Principal VAT Directive member states may apply a reduced rate of VAT to printed publications such as books, newspapers and periodicals. However, digital publications must be subject to the higher rate, with an EU minimum standard rate of 15%. The only exception is digital books supplied on a physical medium, such as a CD-ROM.
An EU Commission proposal to allow countries to charge a reduced rate of VAT on e-books, bringing them into line with printed books, was backed by 48 votes to 1 with 2 abstentions in the Economic and Monetary Affairs Committee.
Parliament rapporteur Tom Vandenkendelaere said: "Our way of reading has changed rapidly over recent years. Now, it makes no sense to apply a double standard whereby an online newspaper is taxed higher than a printed one you buy in a shop. This new directive will give member states the option to align VAT on digital content with printed matter."
Music and videos, as well as publications predominantly consisting of music and video content, would continue to be taxed at the standard VAT rate, the Parliament said.
The proposal will now be voted by Parliament as a whole on 31 May or 1 June.
Court of Justice of the European Union (CJEU) advocate general Juliane Kokott said in September 2016 that the European VAT Directive is compatible with the wider principles of European law in applying the full rate of VAT to electronic books, newspapers and periodicals.
The difference in taxation is proportionate, the advocate general said, in that digital books transmitted by electronic means are usually sold a lower price than physical books, despite the higher rate of VAT.
In March 2015, the Court of Justice of the European Union (CJEU) ruled that France and Luxembourg must stop applying reduced levels of VAT to electronic books.
Both France and Luxembourg, with the support of Belgium, had argued that electronic books are covered by 'Annex III' of the VAT Directive, which allows reduced VAT on certain goods including paper books.
However, the Court agreed with the European Commission's argument that as the Annex refers to the "supply of books … on all physical means of support", it is only applicable to "the supply of a book found in a physical medium".