France and Luxembourg lost a legal battle on Thursday to offer lower sales tax on e-books.<br /><br /> A top European court backed EU regulators that only paper books qualified.<br /><br /> EU rules say the 20 member states can set lower rates of value-added tax on printed books.<br /><br /> The European Commission said two years ago that the 5.5 percent and 3 percent rates imposed by France and Luxembourg respectively are illegal.<br /><br /> Officials said the rates cannot apply to e-books as they qualify as an “electronically provided service.”<br /><br /> Judges at the Luxembourg-based European Court of Justice agreed.<br /><br /> They rejected the argument that e-books should be considered a product, rather than a service.<br /><br /> Publishers and booksellers are angry at losing the legal fight.<br /><br /> Writers, they say, earn more royalties from e-books. <br /><br /> Retailers also say the ruling in Luxembourg will put people off ‘electronic reading’. <br /><br /> They have called on the European Commission to revise the rules.
