The fall in V.A.T. = the rise of Amazon?

Currently, when it comes to digital products such as e-books, publishers’ relationships with consumers can be strained. This is because as e-book use increases, consumers can see that there is inconsistency between e-book prices and print prices, with e-books generally more expensive.

Many consumers believe (and are led to believe by the popular press (Waugh) that e-books are cheaper to produce than printed books and any increase in price when compared to its print counterpart is entirely due to the publishers’ desire for huge profits.  

This is especially difficult to justify to consumers, because they have no visibility of the overheads involved but are accustomed to the notion that online content is either free or heavily discounted. In fact, one of the reasons prices differ is because E.U. law states that V.A.T. on e-books must be charged at the standard rate, which in the U.K. means 20%, whereas printed books are exempt. Profit margins are already small, so many publishers are forced to increase their prices in order to compensate, yet if this continues it could undermine publishers’ relationships with consumers even more.

Despite continued lobbying, the U.K. government maintains that it cannot be reduced, but confusingly, in other European countries this is not the case! In 2012 France is planning to reduce the V.A.T. on e-books from 19.6% to 7% as of April, with the French government paying any fines incurred, and Luxembourg has reduced V.A.T. from 15% to 3%, since it believes it has a “technical basis” for the decision (Jones). 

The move by Luxembourg is particularly noteworthy, as the headquarters of a certain ‘Sauron of Publishing’ (Stackpole) is based there, which means that the Kindle publishing business is being handed a huge competitive advantage (Campbell and Jones). Kindle e-books could be sold considerably cheaper, and this significantly increases the threat of Amazon in general.

As the UK government holds its view, even though it could be “missing out on a massive future revenue stream in digital" (Jones), we hold our breath, as we wait for the outcome.

1. Campbell, Lisa and Jones, Philip. “Luxembourg VAT move could lower Kindle e-book prices.” The Bookseller. 16 Dec. 2011. Web. Accessed 20 Jan. 2012.  <http://www.thebookseller.com/news/luxembourg-vat-move-could-lower-kindle-prices.html>

2. Jones, Philip. “UK government holds firm on e-book VAT.” The Bookseller. 23 Dec. 2011. Web. Accessed 19 Jan. 2012. <http://www.thebookseller.com/news/uk-government-holds-firm-e-book-vat.html>

3. Stackpole, Michael. “Is Amazon the Sauron of Publishing?” The Passive Voice. 13 Oct. 2011. Web. Accessed 20 Jan. 2012. <http://www.thepassivevoice.com/10/2011/is-amazon-the-sauron-of-publishing/>

4. Waugh, Rob. “An e-book reader under the Christmas tree? Bad news – publishers band together to hike prices higher than real books.” The Daily Mail. 16 Dec. 2011. Web. Accessed 19 Jan. 2012. <http://www.dailymail.co.uk/sciencetech/article-2074946/An-eBook-reader-Christmas-tree-Bad-news--publishers-band-hike-prices-higher-real-books.html>