Discrepancy over VAT on UK e-books

It has long been a bit of an anomaly that while print books don’t have VAT charged on top of the price, e-books do. There has been significant debate over the past few years about what should be done on this issue, and why e-books are charged VAT while their print cousins are exempt.

And now it seems there is another layer to be looked at. We all know that Amazon dominates the e-book market in the UK, and it is well-known that the company runs many of its operations out of Luxembourg, which has a 3% VAT rate compared to the UK’s 20%.

However, according to the Guardian, when Amazon is drawing up contracts with UK publishers, it does so from the base of the UK’s VAT rate of 20%. Because of its base in Luxembourg, Amazon only has to hand over 3% of the cost price in tax, meaning it makes more of a profit than it would otherwise do.

It’s something that publishers aren’t that thrilled about and it’s a little bit of a tricky issue to get your head round, but you can read more about the e-book VAT/publisher/Amazon issue here.