UK: The Guardian, and Amazon, and UK tax …

The Guardian’s headlines on VAT are beginning to irritate me.

Amazon might “make UK publishers pay 20% VAT“, but only if it sells a service to those publishers and in that case, it would probably be self-assessed by those publishers under the reverse charge mechanism. Regardless, it’s UK tax law that makes the publishers pay VAT.

What the Guardian means, and says badly, is that Amazon force UK publishers to accept a 20% discount on the ‘retail price’ of an ebook as a starting point for negotiation. As for “the true VAT cost to the online retailer is only a fraction of that amount …” – that is absolute rubbish: the VAT cost is borne by the end consumer in the UK. Unless Amazon has any exempt supplies (and if they have any sense, this contracting entity won’t have), the true VAT cost to Amazon is nil, as it is for any business without exempt activities (VAT is not supposed to be an absolute cost for businesses without exempt activities – that’s a basic principle of EU VAT law).

“Its base in Luxembourg allows it to benefit from a European tax anomaly and pay only 3% VAT on digital books sold to UK readers”.  Hard to tell whether they’re referring to Amazon’s need to self-assess for VAT on purchases from suppliers, or the VAT that Amazon has to charge on sales to UK readers. Probably the latter, on my reading, so 1: That’s not an anomaly, that’s the way intra-community VAT works on digital goods sold to consumers, and it’ll change in 2015. 2: Amazon DOES NOT PAY THE VAT. We do (at least, those consumers that buy ebooks from Amazon).  Amazon CHARGES the VAT. Sorry for the caps but this is sloppy and disingenuous and just tiresome on the part of the Guardian’s tax ‘reporters’. Maybe I should know better than to expect them to actually understand VAT, or at least to expect them not to spin for maximum effect.

In short: this is a mangled opportunity to discuss whether Amazon has a near-monopoly position in the ebook market that allows them to dictate terms to publishers – the US Department of Justice investigations into Apple etc appear to have been a gift to Amazon that they didn’t really need. That would be far more in the public interest than an attempt to whip up indignation at the supposed iniquities of VAT.

7 thoughts on “UK: The Guardian, and Amazon, and UK tax …

  1. botzarelli

    1. The Guardian’s readership are excited by the current reports involving (i) US companies (ii) doing stuff with tax which might not involve the maximum amount being paid in the UK (iii) basing operations somewhere other than the UK
    2. The Guardian’s reporters don’t understand VAT or taxation generally or at the very least know that their readers don’t understand it enough to cope with the cognitive dissonance that would involve engaging this knowledge with their antipathy to the matters in 1.
    3. While they profess to be interested in tax, on the basis of tax being used to pay for all the good in the world so that a shortage of money to pay for such good things can be laid at the feet of those they believe “ought” to contribute more to those causes, they have absolutely no interest in markets or things like anti-trust and competition law which rely on liberal economic theories to regulate market activity.
    4. So, the chances of getting their readers interested in the idea of defining a market for eBooks, wondering whether each platform is currently a distinct market and the extent to which eBooks compete with and are substitutable for printed books (and then the extent to which printed books sold via online vs storefront retail are in the same market) approach zero. Of course, were the Commission to investigate, the Guardian would jump up and down in glee in 10 years time if there were to be a finding against Amazon. Except of course that by then the Guardian itself would almost certainly have no print version and be itself a prime beneficiary of regulation of eBook delivery businesses.


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