Officials in Luxembourg, home of Amazon's European HQ, have decided to slice ebook VAT which could cause a drop in the price of digital books across Europe.

The great book pricing divide has long caused headaches for ebook readers and sellers alike - there's no VAT on printed books in the UK, but digital books are subject to an extra 20% tax.

In Luxembourg, the tax has been slashed from 15 per cent to 3 per cent - under the current rules, European readers pay the tax based on the country the vendor is based in and Amazon is one of the biggest players in the e-reading space, thanks to it's hugely successful Kindle.

All change please

Although the rules are set to change - in 2015, consumers will have to pay the VAT rate based on the country they live in, the VAT reduction will see UK-based booksellers at a distinct disadvantage over the next three years.

The UK government has always railed against reducing or abolishing the tax on ebooks because, aside from being loathe to give up all that lovely money, it wants to stay in line with EU law.

David Gauke, exchequer secretary to the Treasury, told MPs, "Under EU law, VAT on electronic books must be charged at the standard rate."

However, Luxembourg isn't the only EU country to have decided to cut ebook VAT - France is set to follow suit - which leaves the UK in a rather tricky situation, particularly come 2015.

From the Financial TImes