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Old 10-22-2012, 08:03 AM   #1
MartinC
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Amazon pockets VAT paid by UK publishers

Well here's a surprise.

http://m.guardian.co.uk/ms/p/gnm/op/...k&cat=business
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Old 10-22-2012, 08:35 AM   #2
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No... can't be right... according to many people here (who I believe and trust totally) Amazon is our friend, only here to provide us with books on a charitable basis... and would never take advantage of their dominant position and act in a predatory fashion let alone manage to avoid paying tax in countries where they do business...
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Old 10-22-2012, 08:54 AM   #3
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I had seen a tweet about that article but, reading it just now it sounds like utter garbage. Of course Amazon are excluding the VAT from their cost prices, why would anyone not do that? Why on earth would they allow the publishers to charge them more because they are paying a lower rate of VAT? It's only agency pricing that stops them passing on any of that cost saving to the consumer.

They aren't "pocketing the VAT" - I imagine that would be massively illegal - they are simply making more profit by avoiding the UK rate, which was surely the point of the whole Luxembourg scheme. I might find that objectionable, but I don't see any new information here.

It seems like a bit of corporate mud-slinging, to me.
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Old 10-22-2012, 09:15 AM   #4
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All the companies want to earn profit. Some do it by providing better services resulting in more sales, paying less taxes by the using the loopholes that are created by governments. Others do it by forming illegal price fixing schemes, erecting more barriers to protect profits (read DRM, geo restrictions).
Instead of turning it into yet another Amazon v/s publishers’ thread, we can wait and see any of the government agency acts on it. Otherwise, it is simply a mudslinging exercise as DrNefario has put it.
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Old 10-22-2012, 09:32 AM   #5
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Quote:
Originally Posted by DrNefario View Post
I had seen a tweet about that article but, reading it just now it sounds like utter garbage. Of course Amazon are excluding the VAT from their cost prices, why would anyone not do that? Why on earth would they allow the publishers to charge them more because they are paying a lower rate of VAT? It's only agency pricing that stops them passing on any of that cost saving to the consumer.

They aren't "pocketing the VAT" - I imagine that would be massively illegal - they are simply making more profit by avoiding the UK rate, which was surely the point of the whole Luxembourg scheme. I might find that objectionable, but I don't see any new information here.

It seems like a bit of corporate mud-slinging, to me.
To me it seems like they are saying to the publishers that they need to have the same price (including VAT) for paper book and ebook. But since the ebook VAT is 20% they are demanding greater rebate from the publisher to cover that. And if they are doing that and then only paying 3% VAT then it looks like pretty bad behaviour.
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Old 10-22-2012, 10:35 AM   #6
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If publishers don't like Amazon's terms, they should pull their books. Sell via other book stores who will now have books Amazon does not. Sell the books DRM free and provide an email to your kindle option along with instructions on how to authorise an email address then you can still target amazon customers.

Will Amazon pull print books in retaliation, maybe. However, if this is common for all publishers to be squeezed, once one makes a stand, I imagine others will start to follow. Just don't collude to do whatever you intend to do

Easier said than done I know and a publisher may take a significant loss by pulling out of Amazon, then again, what's the saying about putting all your eggs in one basket?
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Old 10-22-2012, 12:15 PM   #7
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I think that's the problem, isn't it? That there is only one decent-sized basket, and Amazon own it.
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Old 10-22-2012, 12:25 PM   #8
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In the UK paper books are zero rated (0%) for VAT so that's not what's going on.

Since the Guardian's writer hasn't heard of the MFN "no ebook underselling" terms of Amazon they probably know still less about the esoterics of VAT. Note that since the publishers are UK based they might have to charge 20% at some point.

However, since all this suggests the publishers can get better terms by going indie and taking the KDP T&C, why don't they do just that ? Because it's NOT TRUE perhaps.
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Old 10-22-2012, 12:47 PM   #9
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Quote:
Originally Posted by Little.Egret View Post
In the UK paper books are zero rated (0%) for VAT so that's not what's going on.
What is not going on? That it is zero for paper books and non-zero for ebooks is what leads to this situation. If they had been the same then it had not been a problem.

Quote:
However, since all this suggests the publishers can get better terms by going indie and taking the KDP T&C, why don't they do just that ? Because it's NOT TRUE perhaps.
What do you mean by better terms? The problem is that not using Amazon will losse you to much customers. And it would also make a book fail and the authors career fail. It is irresponsible to the author to sell less copies then they can sell.
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Old 10-22-2012, 01:27 PM   #10
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Quote:
Originally Posted by Little.Egret View Post
In the UK paper books are zero rated (0%) for VAT so that's not what's going on.

Since the Guardian's writer hasn't heard of the MFN "no ebook underselling" terms of Amazon they probably know still less about the esoterics of VAT. Note that since the publishers are UK based they might have to charge 20% at some point.

However, since all this suggests the publishers can get better terms by going indie and taking the KDP T&C, why don't they do just that ? Because it's NOT TRUE perhaps.
Little out of touch with reality... eBooks have always been subject to VAT in the UK... and that IS currently 20%.
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Old 10-22-2012, 02:44 PM   #11
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I thought under the Agency scheme Amazon is only the delivery mechanism receiving a 30% commission. The UK publishers are the retailer of ebooks and you are purchasing the files from them.
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Old 10-22-2012, 06:50 PM   #12
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Originally Posted by elcreative View Post
Little out of touch with reality... eBooks have always been subject to VAT in the UK... and that IS currently 20%.
Amazon rents a cupboard in Luxemborg so they only need to charge the Luxemborg VAT rate, which is about 5% for digital items.
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Old 10-22-2012, 07:25 PM   #13
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Amazon rents a cupboard in Luxemborg so they only need to charge the Luxemborg VAT rate, which is about 5% for digital items.
That only applies to them and their books, there are other companies around apart from Amazon... I repeat the VAT on eBooks in the UK is 20%, moral being don't originate your eBook sales in the UK...

And for other comments, what does Agency Pricing have to with anything... half of the pubs have already settled and have no Agency Pricing any more plus selling a license is equally subject to VAT - it makes no difference whether you purchase an eBook or a license for one, they're both subject to VAT in the sales source country...

Last edited by elcreative; 10-22-2012 at 07:29 PM.
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Old 10-23-2012, 03:38 AM   #14
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Agency pricing doesn't seem to have gone away anywhere in the UK, from what I can see.
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Old 10-23-2012, 04:23 AM   #15
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Quote:
Originally Posted by Little.Egret View Post
However, since all this suggests the publishers can get better terms by going indie and taking the KDP T&C, why don't they do just that ? Because it's NOT TRUE perhaps.
Quote:
Originally Posted by tompe View Post
What do you mean by better terms? The problem is that not using Amazon will losse you to much customers.
According to the article:
Quote:
which in some cases can result in publishers receiving less than 10% of the price paid by the online customer.
and
Quote:
According to another unnamed publisher who negotiated an ebook deal for a well-known figure, Amazon sought a deal that would have resulted in a 92% discount. The publisher refused the terms, which would have seen them receive just 80p on an ebook selling for ú10 on Amazon's UK website.
An independent author using KDP gets 35-70% of the price paid by the online customer. (for books priced at ú10, KDP gives 35% royalties, so you'd get ú3.50)

It seems odd that a random nobody with no negotiation power can get 35-70% royalties, but the large publishers can only negotiate royalties of 8-10%. If that's true, they might want to seriously consider using KDP.
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