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2014 Budget - No More 3% VAT for eBooks

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Offline Campbell
18 Mar 2014, 08:15 AM | Post: #1

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2014 Budget - No More 3% VAT for eBooks

The BBC are reporting that today's budget will impose British VAT on all eBook purchases made here, effectively removing the Luxemborg 3% VAT loophope we all benefit from.
http://www.bbc.co.uk/news/business-26529697

I can't imagine an extra 17p going onto a 99p book, or 34p onto a £1.99 book... £1.16 and £2.33 just sound odd. So either prices need to normalise a little higher - or it'll come out of our pockets. I'm guessing the price competition angle many indies use will mean our per unit cut will fall. It doesn't kick in til Jan 1st 2015, but it's still naff - especially as paper books are zero rated for VAT.
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Offline Tim_A Reading strictly murder by Lynda Wilcox
18 Mar 2014, 08:59 AM | Post: #2

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RE: 2014 Budget - No More 3% VAT for eBooks

Well, that's bloody awful.
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Offline Mark David Welsh Reading The Stand (Uncut) - Stephen King
18 Mar 2014, 09:11 AM | Post: #3

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RE: 2014 Budget - No More 3% VAT for eBooks

But it's 'good for the economy' don't you see? This helps to safeguard and perhaps increase the profits of big business at the expense of the independent little guy. Then big business can make the necessary donations to the political organisations involved. It's called Capitalism I believe. Inevitable that Davey Boy and his Cheap Spivs would get round to it in the end... as would Eddie, Nige and the Clegger in his place. Write to your MP! It won't do any good of course but you might feel a bit better for a few minutes - same as when you go to the polls to vote out the incumbent. Of course you know the next guy will be in the Westminster bar in a few weeks laughing at all the proles who voted him in while he works on his expenses claim... but there you go. That's politics for you.
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Offline AKMichaels Reading Sixkill by Robert B Parker
18 Mar 2014, 09:20 AM | Post: #4

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RE: 2014 Budget - No More 3% VAT for eBooks

Not good news at all!
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Offline Campbell
18 Mar 2014, 09:33 AM | Post: #5

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RE: 2014 Budget - No More 3% VAT for eBooks

(18 Mar 2014 09:11 AM)Mark David Welsh Wrote: Wrote:  But it's 'good for the economy' don't you see? This helps to safeguard and perhaps increase the profits of big business at the expense of the independent little guy. Then big business can make the necessary donations to the political organisations involved. It's called Capitalism I believe. Inevitable that Davey Boy and his Cheap Spivs would get round to it in the end... as would Eddie, Nige and the Clegger in his place. Write to your MP!  It won't do any good of course but you might feel a bit better for a few minutes - same as when you go to the polls to vote out the incumbent. Of course you know the next guy will be in the Westminster bar in a few weeks laughing at all the proles who voted him in while he works on his expenses claim... but there you go. That's politics for you.

It's actually an EU directive - http://europa.eu/legislation_summaries/taxation/l31057_en.htm
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Offline davidwailing Reading
18 Mar 2014, 09:39 AM | Post: #6

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RE: 2014 Budget - No More 3% VAT for eBooks

This has been in the pipeline for a long time, and it's inevitable that the government will remove Amazon's advantage. With all the furore over corporation tax not being paid, they have to be seen to be doing something. It'll be interesting to see that if all the people who claimed Amazon was evil and dodging their tax will now complain Amazon's prices are suddenly too high!

The silver lining here is that it might level the playing field a little and cause new challengers to Amazon's crown to emerge. We know from Rosen that Tesco have long-term plans to sell eBooks via Blinkbox and that eventually that will include indies, and they're one of the few companies huge enough to take Amazon on. So although we will all suffer with increased Kindle eBook prices in the short term, maybe we'll find there are new emerging channels that work better than Kobo or Apple.
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Offline Ray Kingfisher Reading No, Writing.
18 Mar 2014, 12:14 PM | Post: #7

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RE: 2014 Budget - No More 3% VAT for eBooks

Bastards. Sorry for my language but what utter bastards.

Didn’t George Harrison have it right: ‘Be thankful I don’t take it all’ ?

This is a blow for the ebook industry, for readers, for the educational advantages of reading, and for us Indies for sure.

As others have said, it looks like an EU wide measure rather than the UK budget, and goes against the grain of the ‘single free market’ that Amazon were taking advantage of.

I’m not against UK purchases attracting UK rates of VAT per se - I think that makes sense. But why not keep it at 3% ? It’s a big hike all the way to 20%. Or why not even equalise ebooks with paper books at VAT free? Then again, when did taxes ever come down?
I know Amazon have received a lot of stick for tax avoidance, but I hope they find a loophole for this - perhaps lending via Prime will expand?

The only advantage I see is that it will increase the price gap between Indies and the big boys - but it will definitely depress sales overall.
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Offline Campbell
18 Mar 2014, 12:25 PM | Post: #8

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RE: 2014 Budget - No More 3% VAT for eBooks

The 3% rate was a loophole - via HQing themselves in Luxemborg.

The new 20% is the UK standard VAT rate for eBooks - which was never applied to Amazon (or, to my knowledge, any of the other big retailers who all used avoidance mechanisms). France had their VAT rate at 5.5% for eBooks (and paper!) for ages.

The new VAT directive standardise VAT (min 15%, but may be higher) across the union. There are exemptions - both the usual geographic ones (non-EU territories so Gib, Channel Islands etc) and some old grandfathered in exemptions like books, The UK also gets two 'gimmes' where they can deviate from union policy.

The problem is that books are given special dispensation while eBooks aren't - which is insane. It's a medium change only - and eBooks are greener.

I don't know what Amazon's response to this will be - but they'll do everything they can. At the 35% royalty, Amazon will be shouldering 65% of the hike (so 12% - two thirds of the difference between 3% Luxemborg and 20% British VAT). At 70%, they'll still be taking 6% of the hit. We'll take the rest.

Of course, we can hike prices - but there's a lot of competition. Authors with predominantly US / Aus fanbases won't be impacted as much as EU-centric authors. So prices hikes may mean volume loss - which will force us to absorb the VAT hike.
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Offline Katherine Roberts Reading I keep forgetting to update this!
18 Mar 2014, 12:26 PM | Post: #9

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RE: 2014 Budget - No More 3% VAT for eBooks

Personally, I don't see why there should be VAT on (unenhanced) ebooks at all, especially not on children's books or educational titles. Might this be the thin end of the wedge towards slapping VAT on paper books as well? I am sure the Society of Authors will be on the case - in fact, I think I'll write to them as well as my MP!

It's not Amazon who will suffer here (and anyway, they are not the only only ebook retailer on the block). Authors will lose in the end, since we'll either need to increase our prices here in the UK or - to keep prices low for readers - decrease our royalty. At least indies have the choice, though.

I think that if this goes through it will affect trad-published authors more, as well as their publishers - my ebook royalties are 25% of my publisher's receipts, so the extra VAT will take a chunk out of those. Publishers may even decrease the percentage paid to authors in new contracts. Either way, it's bad news for authors and readers in the UK (though presumbably does not affect ebook sales in the US?)

On the other hand, the same budget is proposing raising the tax threshold for low earners, so possibly what we end up paying the govt. in lost royalties through extra ebook VAT will be made up for in not being taxed on those earnings? Peter and Paul spring to mind... Pondering
Offline Campbell
18 Mar 2014, 12:30 PM | Post: #10

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RE: 2014 Budget - No More 3% VAT for eBooks

" it will affect trad-published authors more, as well as their publishers "

There may be a silver lining for trad published authors - higher eBook prices make paper seem less expensive, so may slow/ reverse the shift towards digital. The 20% VAT on eBooks is more than the cost of printing for higher priced books / offset runs. The big 5 always wanted to protect their print margins, and this change will help them do that.
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