Britain INCREASES tax on ebooks

[tompe]

Originally Posted by GeoffC

Does it happen all the time ?

I'm not too sure I can come up with a similar situation, but I am willing to be proved incorrect.

The thing I referred to was that somebody treated the same product different by for example having different packaging. Is it unfair to sell the same soap in different package with different price?

You also have or have had different VAT rate for food and for eating inside a restaurant. None of these differences are unfair for the customers perspective.

You have said that the thing that was unfair was from the customers perspective. The customers see a different price so the effect that is relevant and caused by the difference VAT rat is a different price. You have still not motivated why it is unfair from the customers perspective...

[tompe]

Originally Posted by omk3

Why is the argument about one word again?

Okay maybe it isn't unfair. But it doesn't seem to make any sense.

Because I asked for the argument behind the use of the word unfair.

On the surface not making sense seems to be true. On a deeper level it makes sense since you want to be able to check that sellers pay the correct taxes.

Distinguishing between books on a physical medium and digital books seems just arbitrary.

Well, an eBook does not pass the borders in any way that is reasonable to control and apply custom and taxes. So in this respect there is a big difference between traditional items and electronic items.

[GeoffC]

Originally Posted by tompe

The thing I referred to was that somebody treated the same product different by for example having different packaging. Is it unfair to sell the same soap in different package with different price?

I am not too sure what this has to do with VAT ....

You also have or have had different VAT rate for food and for eating inside a restaurant. None of these differences are unfair for the customers perspective.

You do ? I wouldn't know - I don't frequent restaurants so I'll take your word on this, although I am sure VAT is levied on the service provided.

You have said that the thing that was unfair was from the customers perspective. The customers see a different price so the effect that is relevant and caused by the difference VAT rat is a different price. You have still not motivated why it is unfair from the customers perspective...

I am beginning to wonder whether we are talking about the same definition for fair/unfair ....

I seem unable to understand your point and am seemingly unable to explain myself adequately. Life is too important to get stuck in this kind of argument, especially when bad news lands unexpectedly. Forgive me, but I must decline any further participation in this particular thread.

[Grumpyreader]

I think the idea that all book (paper, hard or e) will all be VAT free is a nice idea...and will remain that. The "fair" alternative is to make all books subject to VAT. This penalises those who can't afford to buy electronics to read ebooks on (lets call them "the poor") over those who can afford to buy electronics (lets call them "the better off"). I don't think that's fair.

We could discuss making ebooks VAT-rated at 0% or, even better, VAT exempt but it's not going to happen.

The same argument has been used time and again when looking at food/household products and clothes. Toilet paper is considered a necessity (no VAT or 0% rated, can't remember which) whilst ice cream is a luxury and therefore you pay VAT at 17.5%. There are some really random distinctions made - remember the M&S tea cake question? If it was a biscuit it was 0% rated but as a cake it was standard rated.

Fair? No. But it's the way the system works.

[JSWolf]

VAT is wrong. It adds no value to the consumer.

[murraypaul]

Originally Posted by JSWolf

VAT is wrong. It adds no value to the consumer.

That isn't the derivation of the phrase. It is a tax on the value added to the product at each stage of the process. Each company pays VAT on the goods they sell and claim it back on the goods they buy, so that they are taxed on the difference in buying prices and selling prices.

[Grumpyreader]

I think it is the infact reverse of that interpretation.

You tax the next person for the value you have added to raw products.

A builder pays VAT on lumber (sp? apologies if I've got the spinal lumbar rather than the woody one) because the timber merchants turned trees into wood. The timber merchant added value therefore passes that on to the builder.

The builder turns the timber into an A-frame house, thus adding value. He then charges the housebuyer VAT as part of the purchase price because he added value. He can offset the VAT he collects (output VAT) against the VAT he paid (input VAT).

The end user is the one who foots the VAT bill because he/she doesn't add any value.

[murraypaul]

Originally Posted by Grumpyreader

I think it is the infact reverse of that interpretation.

You tax the next person for the value you have added to raw products.

A builder pays VAT on lumber (sp? apologies if I've got the spinal lumbar rather than the woody one) because the timber merchants turned trees into wood. The timber merchant added value therefore passes that on to the builder.

The builder turns the timber into an A-frame house, thus adding value. He then charges the housebuyer VAT as part of the purchase price because he added value. He can offset the VAT he collects (output VAT) against the VAT he paid (input VAT).

The end user is the one who foots the VAT bill because he/she doesn't add any value.

? Your example matches what I said:
"Each company pays VAT on the goods they sell and claim it back on the goods they buy, so that they are taxed on the difference in buying prices and selling prices."

The housebuilder will charge the final customer VAT on the house (actually houses aren't VAT'd, but we'll pretend they are.). The housebuilder has paid full price, including VAT, for the lumber.
The housebuilder has to pay to the government the VAT on the house, but can subtract from that the VAT included in the price they paid to the lumber merchant, so that they end up paying (remitting) VAT on the difference between selling and buying prices, as I said.

Example:
I buy raw materials for GBP 117.50. This is base price of GBP 100, and VAT of 17.50. I turn these into goods and sell them for GBP 352.50. This is a base price of GBP 300 and VAT of GBP 52.50.
(We assume there is no other complications at any stage.)
I pay to the government (52.50-17.50) = GBP 35 in VAT.
The raw materials manufacturer pays GBP 17.5 in VAT.
The total VAT has been paid, in proportion to the 'value added' by each of us at our stages in the manufacturing process.

(Of course the consumer ultimately ends up being charged the VAT, in the same way that they are charged for the raw materials and both companies labour.)

[jbjb]

Originally Posted by murraypaul

? Your example matches what I said:
"Each company pays VAT on the goods they sell and claim it back on the goods they buy, so that they are taxed on the difference in buying prices and selling prices."

The housebuilder will charge the final customer VAT on the house (actually houses aren't VAT'd, but we'll pretend they are.). The housebuilder has paid full price, including VAT, for the lumber.
The housebuilder has to pay to the government the VAT on the house, but can subtract from that the VAT included in the price they paid to the lumber merchant, so that they end up paying (remitting) VAT on the difference between selling and buying prices, as I said.

Example:
I buy raw materials for GBP 117.50. This is base price of GBP 100, and VAT of 17.50. I turn these into goods and sell them for GBP 352.50. This is a base price of GBP 300 and VAT of GBP 52.50.
(We assume there is no other complications at any stage.)
I pay to the government (52.50-17.50) = GBP 35 in VAT.
The raw materials manufacturer pays GBP 17.5 in VAT.
The total VAT has been paid, in proportion to the 'value added' by each of us at our stages in the manufacturing process.

(Of course the consumer ultimately ends up being charged the VAT, in the same way that they are charged for the raw materials and both companies labour.)

I suspect everybody is saying the same thing here, there's just a confusion between who is performing the mechanics of paying the government and who is bearing the cost.

The actual payments to the government are spread along the chain of added value, but all the cost at the end of the day is borne by the consumer.

/JB

[pdurrant]

Originally Posted by jbjb

The actual payments to the government are spread along the chain of added value, but all the cost at the end of the day is borne by the consumer.

Exactly so — all the VAT payments made by VAT-registered businesses can be claimed back from the government. You also pay to the government all the VAT you collect, which usually comes to more than you're claiming back.

On one very bad quarter, I have received a VAT refund. Unless your business output is zero rated, ending up with a VAT refund is very bad news — you've spent more than you've earned!

[jbjb]

Originally Posted by pdurrant

On one very bad quarter, I have received a VAT refund. Unless your business output is zero rated, ending up with a VAT refund is very bad news — you've spent more than you've earned!

Absolutely! However, the VAT refund can be a help in the startup phase of a business - you can get the VAT back on your inputs while you wait for sales to ramp. Helps a bit with cash-flow!

/JB

[Grumpyreader]

Absolutely - we're all talking about the same thing.

The original point was that someone said it wasn't "fair" that paper books incurred no VAT (0% rated or exempt, I can't remember which) whilst ebooks had VAT at standard rate.

As there are arguably more raw materials going into a paper book than an electronic one, logically paper books should have VAT at standard rate too but this is a policy decision rather than a technical one.

Would I prefer ebooks to be 0% rated? Absolutely. Do I want this to be at the expense of paper books losing their 0% status or the playing field evened with both having standard rating? No.

The squeaky wheel doesn't always get the oil. Some times it gets hit with a huge mallet...

Remember when we all complained that women got their pension at 60 but men had to wait til 65? Did they lower the male retirement age? No, they raised the female one. I think the Government would see the ebook situation the same way.

[pwjone1]

As an observation, generally the rule on tax changes is, corollary to Murphy's Law:

* All tax changes result in my paying more taxes

Doesn't seem to matter if they're trying to tax the rich for the poor, or vice versa, seems I'm more out of pocket. For the purposes of progressive taxes, I'm rich, for the regressive ones, poor. U.S. books generally fall under state and local sales taxes. And given the history of us colonists, you can understand that we're not very happy with all that. Probably one of the reasons Amazon does well is that there was a quirk where web sales didn't have to collect sales taxes, somewhat still in dispute. I, of course, pay the taxes on my state income tax form, but I suppose others might not have.

I do kind of wonder about VATs, in general, don't have them here, but if a paper book is not subject to the VAT, and the eBook is, well, seems somehow wrong.

Being a reasonably good colonist, and obviously therefore all in favor of avoiding unnecessary taxes, I do wonder what the situation is on printed books that contain a CD. Do they get charged the VAT? And, if not, would eBooks then make sense if they sold you say a little one-pager "book", with a CD or something that had the actual eBook. Or then a link, like O'Reilly and a few others do, to an updated section you could download. Or some such, idea is to avoid the VAT.