Thursday, 7 April 2011

E-Books are NOT a necessity!

Well, this here post will be a proper collision between the day job and the blog job!

I want to talk about VAT a little bit *watches blog readers' eyes glaze over*

Briefly, books are deemed to be a necessity and therefore attract no VAT.

However, e-books do attract VAT.

The EU took a decision that member states of the EU would decide for themselves at what level to set VAT on e-books, and most member states (such as Spain) instantly took VAT to the same level as on paper books (4% in their case). Does this not then give such territories a competitive advantage over the UK in terms of books being delivered?

But the UK chose not to apply this ruling - which presumes that they feel e-books to be a luxury and not a necessity.

We are still talking about books and reading, though, which are, in my view, a necessity to the health, happiness and education of the English population. Why should the nature of the provision have any effect?

(As to that, it is because downloading is seen as providing a service and not a supply - but is downloading not the future? So many more people are downloading music, films, books, newspapers these days that it seems old-fashioned to still class downloading a service rather than a direct provision of goods).

Here's something for you: pornographic magazines attract no VAT. Electronic textbooks do attract VAT *shrugs shoulders* Something wrong there, surely?

At this point, it strikes me that the e-book market is at a crucial tipping point: more people than ever before are using e-readers, and is this refusal to reduce VAT going to cause issues for a burgeoning market that ought to be encouraged?

Does anyone have any views on this? Do you think that paper books and e-books should be treated in the same manner, to achieve pricing polarity? Do you think there is ever a situation where VAT can be charged on paper books as well?

Did you have any knowledge of this prior to my post? Does it effect the way you look at e-books?


  1. All good points, and of course ebooks shouldn't have VAT on them, just like printed books don't.

    However I don't think there is anything sinister going on. I think it's because ebooks are classified as software, not books, and therefore they get VAT slapped on them just like MS Office or Dragon Age 2 do.

    So the fight should be to get them reclassified as books instead.

  2. The way I figure it, in terms of taxes, ebooks should have the same ones applied as hard copies. There's the common debate about which format should be cheaper, blah blah blah, but really, that's not the issue here. If you tax the information in one format, there's no reason not to tax the info in a different format, especially when the difference is just whether it's an ebook or a hard copy.

    But I freely admit that taxes and economics are not my forte, and am willing to have my opinion be firmly trounced in this case!

  3. In Italy, books are non a necessity and are applied a 4% VAT. For E-books, it's even worse: they are seen as an service (like a PC application or a game) and are applied a 20% VAT ...... :(

  4. Your points are sound on the issue but ignore the politics of the matter. The three parties involved in the matter (governments, digital distributors and publishers) have personal stakes in this situation that do not exactly line up with the buying public.

    Politicians are desperate for revenue. Digital goods are newfangled and synonymous with youth...youth who in the US at least do not vote. So, tax digital goods to develop a new revenue source and help prop up an ailing budget. Makes sense.

    Publishers are keen to prop up their deadwood business. A VAT on ebooks help makes paper more attractive price wise and perpetuates the current model. Until publishers are finally ready to jump onto the ebook bandwagon, I doubt they will lobby hard against a VAT on ebooks.

    Digital distributors are the only ones in this group that would fight the VAT but even then they need to be careful. They have to balance their relationships with the publishers and politicians. Any direct attack on the special VAT-free nature of books could easily backfire and cause politicians to add a VAT to those items as well.

  5. I was, at first, surprised that eBooks were treated as a luxury when paper books were not. But then I reflected on my own use of eBooks. I don't much, and there's one simple reason for this: I can't afford a luxury eReader. I therefore have to read them on my laptop - an experience I don't find pleasant - and I'm STILL lucky in that I had a friend well-enough off to give me a luxury item like a laptop. Books are accessible to all. Once bought, they can be given with ease to even the poorest person, and buying the book itself, though expensive, does not require the sort of money needed to have the sort of life that enables eBook reading. Downloading is becoming ubiquitous to those of us who are well-enough off to have broadband and the sort of devices that can use it, but even that is rather luxurious. It is quickly becoming a necessity, but only because, as a nation, we are mostly so very rich - the poor who cannot afford it are still getting squeezed.

    That a text book should be charged VAT when a porno is not is ridiculous, and, overall, I don't have a fixed conclusion of this. But I do wonder at the way so many of my better off friends so easily forget that many people (myself included) simply do not have the sort of money that enables reading an eBook as a practical solution. eBooks, unlike physical books, are not isolated items in themselves that can be viewed wherever and by whomever.

  6. We have the same situaton in Norway, there's VAT on e-books but not on paper books.
    But we have an added problem here. E-books bought from a foreign net-based bookshop does not have VAT. I know the Norwegian government are pushing for Amazon etc. to collect Norwegian VAT, but with Amazon's history of refusal to collect VAT I don't see that happening. Since a Norwegian e-book shop has just opened I think it's likely in the near future that Amazon will stop selling e-books to Norway rather than collect taxes. So if you are Norwegian, buying a Kindle is not a good idea.

    Another thing is that if you buy an e-book from a foreign website in Norway and don't report it to the authorities, you are technically guilty of tax-evasion and a criminal.

    I don't really see a problem with collecting VAT on e-books. They are defined as a service, and I'm fine with that. I think it is a good way to counter Amazon's dominance when it comes to books. And I think politically it makes sense to have VAT on downloads that can be done from anywhwere in the world but not on the books that are bought in shops in the country in question. It is a way government can help domestic businesses, and it is no different to subsidies and tax breaks for businesses, that are already in use all over the world.

  7. Luxury e-reader? Maybe, just maybe. But VAT is applied to e-readers anyway. So it still doesn't make sense to add VAT on top of e-books, which is the content, which can be read as well on a phone or a commodity low-end laptop etc.

  8. The other thing to keep in mind is that, in spite of being neither a customs charge nor an excise, VAT is governed by HM Customs & Excise.

    You know, the organisation that reserves the right to sieze your car and everything in it on returning from France if you have bought a large enough quantity of alcohol of tobacco that they feel you are likely to be reselling it; a quantity they refuse to define in advance. This is irrespective of the fact that this right has never been raised or debated in parliament; that both buying the goods and bringing them into the UK is perfectly legal, as long as you aren't intending to sell them; and that, you know, the car's yours, whether you plan to sell the goods on or not.

    These are not clean-thinking people. When people are mean about the taxman, it's because they're not aware of the VATman.

  9. It's madness that we pay VAT on eBooks. This means that a publisher gets around 16.5% LESS for an eBook, than for the same-priced paperback. Add into the mix that most right-thinking publishers charge less for eBooks, that income shrinks even further.

    Most modern phones are capable of displaying eBooks, so I don't eBooks are luxury items (I first started reading eBooks on my phone 10 years ago). As Adam says, it's just that electronic files are classed as software, and until recently, sales of eBooks weren't high enough to make anyone too worried about this. By this time next year, publishers in the US will have announced that they derive more income from eBooks than paper-based books, and where the US leads, the UK will follow. We're a year or two behind the US in this regard but I'm sure we'll see some lobbying before then.

  10. It's not about books. It's about money. The taxes are required to fund the incompetence and greed of the government and sections of the civil service.

  11. As of today, VAT for books in Spain is 4% while VAT for ebooks is 18%:

  12. Pretty sure it's just a case of what they think they can get away with. The revenue wouldn't be huge on VAT from books and not worth the bad PR any government would get from taxing something the majority of people think is culturally important. But ebooks are new, still not the major revenue stream for publishers and not considered so sacred by most people, so it's one they're probably not going to be fought too hard on. Most likely they'll back down if the country comes out against it, but at the moment not enough people care.

  13. I guess governments are looking for ways to increase revenues and are looking at just about anything.

    In the US, state governments are trying to require Amazon and other e-sales companies to collect sales taxes. If I recall correctly, for Amazon, it was based on affiliate connections. So Amazon pulled its affiliates from those states in order to get around it. Makes sense or not, I'm not sure. But I suppose the search for revenues is playing at every goverment level just in different ways.

    Author of Belvoir