Previously we paid 3% on many Amazon digital products because Amazon shipped them to us via Luxembourg which applied their VAT rate of 3% - the lowest in the EU. From 1st Jan 2015 we were charged the VAT rate of the destination EU state rather than the supplier EU state. The UK therefore have to pay 20% VAT on digital products. (Ireland - 23%)
In the UK the new rates meant a price rise of at least 17%. That doesn't seem a lot on an e-book which cost 77p formerly. They now cost a minimum of 99p from Amazon (a 29% price rise) but it's far more than inflation was, and a sharp contrast with the zero VAT rate on paper books.
Ask politicians and they'll tell you "Here in the UK, VAT is charged on e-books because they are a service."
They've also said "The EU doesn't allow us to charge a reduced rate."
Let's compare e-books with paper books and see how they compare:
|Requires an author||Requires an author|
|Requires an editor||Requires an editor|
|Requires formatting||Requires formatting|
|Trees need to be felled (requires oil)||Not required|
|Timber needs to be transported to papermill (requires oil)||Not required|
|Papermill manufactures paper with some waste sludge (requires some oil)||Not required|
|Sludge needs to be disposed of (requires oil)||Not required|
|Paper needs transporting to printer (requires oil)||Not required|
|Ink needs manufacturing (requires oil)||Not required|
|Books need to be printed (requires oil)||Not required|
|Books need to be transported to distribution depot (requires oil)||Not required|
|Sales team need to visit retail outlets (requires oil)||Not required|
|Books need to be transported to retail outlets (requires oil)||Not required|
|Customer needs transport to bookstore and back (requires oil)||E-books are delivered direct to reader electronically.|
|Surplus unsold books need transport back to printer (requires oil)||Not required|
|Surplus requires storage or redistribution or pulping (requires oil)||Not required|
|Book pulp requires cleaning of toxic ink and disposal of the toxins (requires oil)||Not required|
- The EU and the UK have a declared aim of reducing carbon emissions, yet favour paper books which produce carbon emissions, at the expense of ebooks. It's been estimated that 95% of the carbon dioxide emissions could be eliminated by switching to e-books. Despite that, Reuters reported on 7th March 2017:
The European Court of Justice was called to interpret EU rules on value-added tax (VAT) after Poland's commissioner for civic rights questioned whether the system of allowing lower rates only for printed publications was fair.
The court said the rules allowed EU countries to apply reduced VAT rates to printed but not digital publications even though both met the European Parliament's objective when passing the VAT directive - the promotion of reading.
- The sludge produced by recycling books contains some particularly nasty toxins which are expensive to dispose of safely. A Danish report found some of these products were being introduced into food via recycled paper.
Is there hope that VAT will be reduced for e-books? It seems that the EU is happy to support the printing industry but feels it can ignore the wishes of content providers and readers. It sets goals and then ignores them.
So what can be done?
In the UK we are now facing BREXIT. Once that has gone through it will be up to the UK government to set the VAT rate charged for e-books.
- If they fail to do this they are slapping the face of every author, whether that be the author of books, magazines or newspapers because their content is not as valuable as the printing presses.
- It means they don't care about reducing carbon emissions.
- It means they don't care about pollution.
- It means that they don't see e-literature as a way of saving schools money.
Ebooks and paid e-literature (electronic newspaper/magazine subscriptions) carry 20% VAT but paper books, newspapers and magazines are zero rated for VAT. In the past we have been told that EU legislation prevents a 0% VAT rate and that e-literature is a 'service'.