Category Archives: amazon

Amazon free Christmas

It will come as no surprise that, whilst truly disliking Amazon, I continue to purchase more and more from them. From all my CDs and books through to shoelaces, toasters, kettles, headphones, humane mouse traps, flea spray, you name it…

Following on from seeing Brad Jones’ keynote at FUTUReBOOK last week, from recent BBC documentaries (“Robert Peston Goes Shopping” and “Amazon: The Truth Behind The Click“), and from the very public way they mess with the UK tax system and our high streets I thought that this Christmas I really would do what I’ve been saying for years and actually try and have an Amazon-free Christmas.

I’m going to record my experiences and publish them here in the New Year.  So far, two purchases in, I’ve ended up paying a premium of £1.94 and have made both purchases from play.com having tried independent online retailers first for both but failed in some way both times.

VAT on eBooks, and yet more reasons to dislike Amazon

We all know that Amazon doesn’t pay tax. It’s a matter of public record and the subject of many a vainly attempted Christmas boycott. One of the many wheezes they use is to sell all of their digital books from a Luxembourg subsidiary. They do this because Luxembourg only charges 3% VAT on digital goods, whereas the UK government levies 20% VAT on ebooks.

This means that the largest retailer of digital books in the UK pays only 3% VAT on its ebook sales, but any UK based retailer is forced to pay 20% VAT. This dramatically skews the market in Amazon’s favour, and is hugely detrimental to any attempt by another retailer to break Amazon’s grip on digital reading.

Right now, for example, a book sold at £4.99 by Amazon nets Amazon £4.84 after tax, but only nets a UK based retailer £4.16. In a retail sector with such aggressive competition that 68p is vital and at the moment UK.gov is heavily favouring Amazon’s position.

Amazon are also playing fast and loose with the VAT rules in other ways. Right now a self published author through KDP only pays the 3% rate that Amazon pays. This means that the author lists their book at £1.93 and it appears for sale at £1.99 on the Amazon site. However, Amazon is charging traditional publishers the full 20% rate, despite only paying 3% themselves. In other words, they are screwing additional margin out of the traditional publishers while further tipping the balance in favour of the self published authors (and, one assumes, those published by Amazon themselves).

Currently there is a ruckus about VAT on ebooks in the UK, with a legal challenge to the validity of the tax underway. Physical books are VAT exempt in the UK, and there are two strong legal arguments that ebooks should be too. Firstly the book VAT exemption simply uses the word “book”; a digital book is still a book and any attempt to levy VAT on an ebook could be ruled a misinterpretation. Secondly, previous case law has ruled that where an item meets a consumers needs “in the same way” it should be classified similarly for VAT purposes; clearly an ebook satisifies this criteria too.

I’m hoping HMRC rules that digital books are VAT exempt:

  • Physical books are already VAT exempt for a good reason; as we move to digital by default we don’t want a stealth tax on reading
  • The UK government doesn’t get any revenue from ebook VAT anyway, as Amazon pays its VAT in Luxembourg
  • It’s hugely skewing the UK market in Amazon’s favour, making competition even harder
  • If the EU does force France and Luxembourg to increase their VAT rates on digital goods while we are VAT exempt it will create an advantage for UK online book retail throughout Europe

Back in 2001 Gordon Brown scrapped Betting Duty (where the punter paid 9% on either their stake or their winnings) because offshore gambling sites that paid no Betting Duty were skewing the market and killing UK bookmakers. Now is the time for a similarly enlightened view on ebook VAT.

[1] Amazon force publishers to pay full VAT

[2] VAT may be dropped on eBooks

[3] Gordon Brown scraps Betting Duty

More Amazon degradation

Following on sharply from the post a few days ago about iSearchBetter comes the news that Amazon are opening up a pay per click network within their own pages. To me this is just another step down an already very slippery slope. They are a shop, not a portal. I go there to buy things. If it becomes difficult (by which I mean either hard or unpleasant) to fulfil that task I will stop going. Cannibalism of your own market is a very dangerous game. I’m starting to look for another store, which after 9 years of dedicated custom should probably be taken as a very bad sign…