Readersforum's Blog

October 29, 2012

Amazon to be stripped of tax advantage on sale of ebooks

Filed under: e-tailers — Tags: , , , , , — Bookblurb @ 8:13 am

European commission tells Luxembourg to end VAT loophole, a decision that could close the gap with British ebook prices.

By Ian Griffiths

Amazon is to be stripped of its huge tax advantage on the sales of electronic books after the European commission ordered Luxembourg to close a VAT loophole.

Amazon is registered as a Luxembourg company and pays that country’s VAT charge of 3% when it sells an ebook to a British reader, rather than the 20% it would have to charge if it were UK-based.

The Guardian revealed this week that 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 a fraction of that.

The European commission – which oversees European Union law as the EU’s executive arm – on Wednesday gave Luxembourg 30 days to increase its VAT rate on digital services from 3% to 15%. This will close a tax loophole that has encouraged companies such as Amazon, Skype and Netflix to be based in Luxembourg to benefit from the 3% rate when selling throughout the EU. Luxembourg must agree to change its VAT rate before the end of November, or face being referred to the European court of justice and risk fines. France has also been issued with a similar warning over its 7% rate for digital services.

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