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VAT cut could see ebook prices tumble

Amazon Kindle

By Stewart Mitchell

Posted on 22 Dec 2011 at 08:35

Prices of ebooks could tumble after officials in Luxembourg slashed the VAT charged on electronic titles.

In the UK, paper books are VAT exempt, while ebooks incur a 20% added tax, which has led to criticism that books for Kindles and other readers are too expensive.

The rate cut in Luxembourg – from 15% to 3% - is significant because that’s Amazon's European base, which could leave UK high street book shops at a disadvantage and put pressure on the UK Government to match the rate cut.

The UK has previously resisted calls to bring ebooks in line with traditional formats, with the Government claiming it was against EU regulations. It may now be forced into a rethink.

We would prefer VAT to be lower or zero-rated for e-books but believe it is wrong to exploit loopholes

“This is a key development,” Amanda Tickel a partner at consultant firm KPMG told The Financial Times. “If the UK doesn’t follow suit, it risks missing out on a massive future revenue stream in digital.”

The Luxembourg cut follows a decision by the French to reduce ebook VAT to 7%. Vat is charged at the location of the seller, rather than the buyer, which would allow Amazon to undercut UK-based ebook sellers, fuelling concern among retailers.

"We would prefer VAT to be lower or zero-rated for ebooks but believe it is wrong to exploit loopholes such as this,” James Daunt, managing director of Waterstone's told The Book Seller.

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User comments

The High Street has only ever been at their own disadvantage

It would be a piece of cake to go into Watertones with any eBook reader, pay £3 and come out with a title loaded on your reader.
Why isn't this happening? DRM and lack of vision.

By cheysuli on 22 Dec 2011

hmmmm

not sure i'd prefer to get the train to croydon to get to my nearest waterstones to have a book put on my wife's kindle for her. right now i feel buying books from my sofa is a little bit more convenient!

By sihaz2 on 22 Dec 2011

Selling ebooks from Luxembourg with less VAT is not a loophole, its called the European single market. If our government (of whatever flavour) wants to put local businesses at a disadvantage then we all know who to blame.

By Shuflie on 22 Dec 2011

It's okay..

.. HM Government can fund cheaper ebooks by reducing ordinary people's pensions.

Just as long as they continue to underwrite huge bonuses for all the bankers that got us into the cack in the first place...

By BrownieBoy6 on 22 Dec 2011

Instead of complaining about Amazon exploiting loopholes why doesn't Mr Daunt set up a Luxembourg office of Waterstones to put them on an equal footing with Amazon, it only takes about 27 days and a little over 1100 Euros to cover the legal side of things, and server costs won't be much different to the UK (if that is where they are currently based). The only other thing they'd have to do then is try to match Amazon on price.

By Shuflie on 22 Dec 2011

VAT on devices though...

...so if the books are cheaper (due to low or no VAT) more people will buy the devices and the tax balance is kept.

Or would this be too forward thinking for UK government to realize and implement?

By Drenlin on 22 Dec 2011

Whyiit only the EU that looks after consumers like this?

Just about every time there is a change that benefits consumers, it doesn't come from the UK govt, it comes from the EU. It was the same with mobile phone roaming charges. another EU directive that cut costs.

Our government would rather use the EU as a scapegoat for everything the govt does wrong or doesn't want to do.

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By sdgvdf on 22 Dec 2011

VAT cut could see ebook prices tumble

do more people believe that Santa clause exists, or do more people believe that when ebooks become vat free or near enough that prices will drop

By invalidscreenname on 22 Dec 2011

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By curiousclive on 22 Dec 2011

@BrownieBoy6

I'm sick of idiots just regurgitating the politicians and activists' line that the bankers got us into this mess.

How exactly was it the bankers fault? There is a Government in this country and there are regulators in this country who all had the means, motive and opportunity to prevent the financial crisis and they did nothing. They stood on the sidelines crowing about how they'd brought an end to boom and bust while ignoring any and all warning signs of troubles ahead. Perfect examples of hubris.

The only real banking issue was Northern Rock's funding model. A model that should have been rigourously stress tested by the Bank of England and the FSA and NR should have been told in no uncretain circumstances that they needed to change their model to a more robust one that would survive a contracting of liquidity.

Then you move onto the Rating Agencies and their planting of AAA assessments on anything anyone paid them for, thereby hiding the real and actual risk from the investors who were buying the products.

Government policy created an environment of cheap and easy credit. People over-stretched themselves and when the piper asked to be paid for the tune they couldn't afford it and started to blame the people who had lent them the money. Everyone wants the affluent lifestyle, but it seems very few people are willing to work and save for it, they should be given it on a plate it seems.

The reason Lloyds TSB is in trouble? Because Labour basically forced them to take on bankrupt HBOS when it was dead, by itself Lloyds were doing OK thanks to prudent banking.

Now it seems the banks are being pilloried for not lending enough when it was over-exuberent lending that got the country in the problem it finds itself now. It seems they can't win at all.

Yes, HSBC and Barclays did well in the market conditions the government created in 2009-2010 but you'd have to be morons not to.

By Phoomeister on 23 Dec 2011

Even if VAT is reduced or removed the price will not drop. Someone will just pocket the difference but I doubt it will be the authors (unless they are self publishing).

By JamesD29 on 23 Dec 2011

@ Phoomeister

Ah yes, because Labour and UK politicians are to blame for the US sub-prime problems?

Naughty politicians, for not legislating against financial activities in a completely different sovereign nation. And shame on our regulatory authorities for not regulating financial transactions occurring in different financial markets involving foreign institutions.

They should hang their heads in shame.

The fact is, banks were bailed out by UK taxpayers' money. Regardless of who was to blame (and unlike yourself, I don't see it as being the fault of only one group but rather as a combination of failures by large numbers of people, including banks, the government and ourselves), the fact remains that banks willingly took hundreds of millions of pounds of money from the UK government. Hundreds of millions of pounds which has directly caused huge reductions in services for taxpayers.

And how do the bankers thank us for this generous gift? By awarding themselves huge bonuses, despite still under-performing. And telling us it's time they stopped apologising, even though they never really did in the first place.

I think people have a right to be aggrieved about this.

On topic: anything which reduces the cost of eBooks is great by me - I fail to see why receiving books through a different medium to pulped wood should rob them of their VAT-exempt status.

By bioreit on 23 Dec 2011

About time...

Ignoring whether this does or doesn't promote book-growth or whether it helps bookshops, etc, etc, this still makes a lot of sense.

VAT is supposed to be imposed upon "luxury" goods, not basic necessities. A book has, obviously, been seen as a necessity - so why isn't an eBook? Why is the latter not as worthy?

The sooner we see them for what they are - the 21st century, non-tree destroying, equivalent then the better!

By artiss on 23 Dec 2011

Well...

There are numerous studies showing that eBooks are more environmentally friendly than paper books. Considering how much the UK is into the “green religion”, I don't understand why we're still paying VAT on eBooks :-/

By Lomskij on 23 Dec 2011

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