From Chris Lynch: Hack of All Trades:
Following a European Commission ruling dating back to 2008, e-books are to be taxed in the European member state in which the consumer is located, at the tax rate of that country, as opposed to the country from which the product is sold. The move prevents Amazon, Nook and Kobo from applying the low 3% tax on e-books sold to European countries, just because their headquarters are in Luxembourg. Instead, the e-book retailers will have to apply the standard UK VAT rate (20% at the time of writing) to e-books sold into the UK.
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Some publishers are already threatening a “revolt” if Amazon tries to pass the additional costs on to publishers. Speaking to The Bookseller Alessandro Gallenzi, founder of Alma Books, said: This isnt a thorny issue, its a hornets nest. Who will take the hit? I dont know. Amazon has so far been absorbing it; I doubt itll do the same moving forward. However, if it tried to force it on publishers there will be revolt and Amazon knows that.
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From a practical standpoint, there isn’t any good news for writers here. If you’re working with a traditional publisher who ends up with higher costs, or deeper discounts, as a result of this change then you will see your royalties squeezed. If you’re an independent, expect to have to work even harder to market your book as prices creep upwards.
If Amazon are smart about this they’ll protect their KDP exclusive writers for as long as possible from this VAT change, making their platform more profitable for their indie authors and slipping another knife into the ribs of traditional publishing houses.
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The downside is that UK consumers, publishers, and creators have been working, some even thriving, under a system where the largest retailers were operating in a tax structure that was, at best, a loophole. Like it or not, its hard to paint this as a tax rise; it’s the closure of a loophole. Readers may love their cheap eBooks, but the gravy train may be coming to an end.
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Despite the ruling, booksellers across the spectrum have long argued that digital books should attract the same 0% VAT rate as physical books in the UK. An Amazon spokesperson said: Amazons view is that the same reduced VAT rate should be applied for both p-books and e-books.
Link to the rest at Chris Lynch: Hack of All Trades and thanks to Nirmala for the tip.