October 26, 2012
Amazon UK stripped of ebook tax advantage
by Ellie Robins
This one’s pretty sweet: Amazon will soon be deprived of one of its (many) tax-dodging schemes.
MobyLives reported earlier this week that Amazon UK had been paying the Luxembourg sales tax rate on ebook sales — that’s a poxy 3% — but forcing publishers to knock the British sales tax — 20% — off the cost price. They had of course been pocketing the difference.
Now the European commission has ordered Luxembourg to raise the sales tax on digital services to 15%, reducing by far the advantage that Luxembourg-‘based’ companies like Amazon, Skype and Netflix enjoy there.
The Guardian quotes Richard Asquith, Global Head of VAT, TMF Group, the indirect tax consultancy:
Countries across the EU have been breaking ranks by charging cut-rate VAT on services sold across borders. Luxembourg’s move at the start of 2012 to cut its ebook rate to only 3% to help attract and retain the media industry has been copied by France, and I expect Belgium to do the same. The UK has held out at the full 20% VAT rate, which has a detrimental impact on the UK industry. The EC’s move will seek to end these anomalies and tax competition amongst member states, and comes under pressure from member states’ ministers of finance.
Amazon is expected to contest the ruling, so there’ll be no immediate impact for British readers or publishers, but it’s a’comin’.
Ellie Robins is an editor at Melville House. Previously, she was managing editor of Hesperus Press.