For quite some time now there have been discussions and even a petition to the UK government about ending the nonsensical full VAT (Sales Tax) rate on ebooks. This is in stark contrast to the fact that paper books are tax exempt. iWriteReadRate posted on our networks and tweeted about it earlier this year.
We have been buoyed that sense could see the way forward by an article we read in The Sunday Times this weekend. A landmark case will be making it to court for consideration, mounted by a leading London law firm against HM Revenue & Customs.
A main reason, as our understanding goes, for the difference between the tax rates levied on ebooks in comparison to paper books, is that they are considered a service rather than a product. For those of you who aren’t aware, ebooks in the UK are currently taxed at the full 20% rate, whereas printed books are exempt, meaning 0% VAT.
It seems nonsensical that the same content, packaged in the same way (i.e. a book), but delivered in an electronic format, instead of hard copy, should have such a disparity.
One way to think about it could be as a land grab for new revenue from the growing ebook marketplace in a time of austerity. Or, alternatively, as simply a misconceived and confusing policy oversight.
At the most basic level encouraging reading is in the general interest of governments – to increase the literacy and education of the population – so this policy seems poorly conceived at best.
Interestingly, as a side issue, Amazon recently were alleged to be taking advantage of the confusion in Europe about VAT on ebooks by charging the full 20% rate to UK publishers, even though their entity in Europe is based in Luxembourg, which has a 3% sales tax rate on ebooks.
From a reader and writer perspective, it is in the interest of both the consumers and producers of ebooks that the UK authorities clarify this and resolve the disparity to bring sense to it. Either that, or savvy consumers and businesses will find ways of intelligently working around it (as Amazon appear to have already done).
As pro-innovation, we here at iWriteReadRate can’t help but think about the impact of not addressing the disparity (and correcting it) would be a mistake. We admit bias, as we would like our readers to pay the same rate on ebooks as they would on a paper version, and for writers to receive as much royalty from the sale of their work as possible.
We’ll keep a look out for updates from the court case, and hope that sense will be brought to this issue soon.
In the interim, we encourage you to tell people about this disparity – popular support can only be a good thing.
(To mention – currently ebooks on iWriteReadRate do not need to have VAT charged – we’re hoping that this issue will be sorted out before we have to!)