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.