A law firm is challenging HMRC in the European Court of Justice over its decision to charge the standard 20% VAT rate on ebooks while printed books escape the charge completely.

London-based Berwin Leighton Paisner (BLP) is acting on behalf of an unnamed client to get the charge scrapped.

Its VAT chief, Alan Sinyor, wants ebooks and print books to both qualify for 'fiscal neutrality' because he says they both meet the reader's needs.

The legal challenge follows in the wake of last week's announcement that the European Commission is consulting on a review of the current register of reduced VAT rates with a view to modernising the outdated list of reduced rate and exempt products, including technology-related products such as ebooks.

The review of technology-related VAT issues covers more than e-books but one of the three main principles is that 'similar goods and services should be subject to the same VAT rate, and progress in technology should be taken into account in this respect' and this is clearly not the case with ebooks which are essentially the same as the physical product.

The consultation, in line with EU VAT Strategy (IP/11/1508), will look at three key issues, including whether the current reduced rate of VAT on certain products is distorting competition within the EU, the actual list of goods and services which benefit from a reduced rate such as utilities and housing, which some believe represent an outdated list agreed many years ago, and a review of how similar goods and services should be treated for VAT purposes, taking into account technological developments.

The consultation is part of an assessment process, and the Commission is not proposing the abolition or introduction of any reduced VAT rate at this stage. The results of the public consultation will feed into the preparation of new proposals on VAT rates, which the Commission will present next year.

The consultation closes on 3 January 2013.