Readersforum's Blog

October 23, 2012

Amazon makes UK publishers pay 20% VAT on ebook sales

Luxembourg-based company profits from European tax anomaly, itself paying only 3% VAT on digital books sold to UK readers.

By Ian Griffiths and Dan Milmo

Amazon is forcing British publishers to cover the cost of a 20% VAT charge on ebook sales – even though the true VAT cost to the online retailer is only a fraction of that amount under its generous Luxembourg-based tax regime.

The firm is able to wield such power over publishers because it has a near monopoly of the UK digital book publishing market. According to reliable estimates, it sells nine out of 10 ebooks in the UK, while using its Luxembourg tax status to wring more profitable terms from publishers.

Companies such as Amazon collect the VAT levy from consumers before passing it on to governments. In the case of Amazon’s UK ebook sales, it only has to pass 3% to Luxembourg. If it was based in the UK it would have to hand over 20%.

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