Thursday, August 16, 2012

Why the UK Government loves and hates Kindle

The UK government must be rubbing its hands with glee as the sales of ebooks rockets. The Guardian reports of that:

For every 100 hardback and paperback books it sells on its UK site, 114 ebooks are downloaded in 'reading renaissance'

However, the Guardian article fails to point out that ebook editions are often more expensive than printed copies because ebooks are subject to VAT. This is something the government will be very pleased about. For every £5 kindle book sold approximately £1 goes to the government. This is a blatant tax on knowledge, but according to The Bookseller the government is blaming the EU:

David Gauke, exchequer secretary and Tory MP for South West Hertfordshire, in a written response reiterated the government's position that such a move would be unlawful. He said: "Under EU law, VAT on electronic books must be charged at the standard rate. A reduced rate cannot be applied to digital or electronic supplies, or supplies of text via the internet, as they are classed as supplies of services rather than physical goods. There is therefore no scope in the principal VAT directive to apply a reduced rate on e-books."

However, its not all bad news. Amazon now sells its kindle books out of Luxembourg which has reduced its VAT rate on them to 3%. Nice to see the free market working in taxation too. It may also be a case of the government shooting themselves in the foot. Better 3% than 0%.