Why are e-books subject to VAT when printed books are not?

As an amateur writer / author as well as a professional copywriter, I’ve published a handful of e-books – on Kindle and via other e-book distributors. I’ve also self-published the same books in print form and I always charge less for the e-books. After all, there are zero costs to me once I’ve formatted my manuscript for Kindle or whatever, which is pretty simple when you know how. I also get higher royalties for e-books. So the reader gets a cheaper book, the carbon footprint of producing and fulfilling the book is nigh on zero and I get a higher royalty. Everybody wins.

Well, at least they do until January 2015…

I was interested to read this article which the Amazon Marketplace emailed to me this morning – about the way that some e-book prices are being hiked up, and why it is ethically wrong. Amazon wants to reduce the price of e-books, big US publisher Hachette – according to the article – does not.

However I would like to add something to that article, and it’s this…

Why are e-books subject to VAT when printed books are not?

If the idea is to encourage people to read by having VAT-free books, then surely e-books should be zero rated too?

This is what HMRC says about books and VAT:

3.1 Books and booklets

These normally consist of text or illustrations, bound in a cover stiffer than their pages. They may be printed in any language or characters (including Braille or shorthand), photocopied, typed or hand-written, so long as they are found in book or booklet form.

Supplies of any of the following are zero-rated:

  • literary works
  • reference books
  • directories and catalogues
  • antique books
  • collections of letters or documents permanently bound in covers
  • loose-leaf books, manuals or instructions, whether complete with their binder or not, and
  • amendments to zero-rated loose-leaf books, even if issued separately.

School work books and other educational texts in question and answer format, are zero-rated because the spaces provided for the insertion of answers are incidental to the essential character of the book or booklet. The same applies to exam papers in question and answer format provided they qualify as books, booklets, brochures, pamphlets or leaflets.

So why the heck don’t the same rules apply to e-books?

Back in 2012, The Guardian newspaper published an article about why e-books should be VAT-free.

But, two years on, e-books are still subject to VAT.

However the Good News for UK readers of e-books (but not for UK HMRC) is that, by basing digital content services in Luxembourg, companies like Amazon have been able to keep VAT down to just three percent for digital services like e-books.

The Bad News, from what I can gather from this other article, is that – from January 2015 – this loophole will be closed. As a result e-books will be subject to UK VAT and prices, doubtless, will go up.

The Financial Times estimates that the extra revenue which the UK government will earn from UK VAT on e-books from 2015 is likely to “run into tens of millions of pounds”.

As an avid writer and reader of books, charging VAT on e-books – whether it’s in Luxembourg OR the UK – is just plain WRONG.

Especially when print books – which cost more to produce and fulfill, and which have a higher carbon footprint because the whole process draws on resources from trees through to the electricity needed to power the printing presses – aren’t subject to any VAT at all.


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