UK budget means new ebook tax rates?

He wants a cut of your ebooks.

For non-British readers, the ritual of UK budget day, when the Chancellor of the Exchequer holds up a red dispatch box with the country’s financial future in it, may seem as quaint a part of national pageantry as beefeaters or the Changing of the Guard. But this year, budget day may have some more serious implications for ebook readers, and ebook publishers and distributors like Amazon, as Chancellor George Osborne brings in new tax regulations relating to digital services (which includes ebooks) in the UK.

According to the government’s budget materials, “the government will legislate to change the rules for the taxation of intra-EU business to consumer supplies of telecommunications, broadcasting and e-services. From 1 January 2015 these services will be taxed in the member state in which the consumer is located, ensuring these are taxed fairly and helping to protect revenue.”

This means that UK consumers will no longer enjoy the 3 percent tax rate that prevails for digital media in Luxembourg, where Amazon and Apple are domiciled. Instead, they’ll have to pay the 20 percent rate applicable to digital media – but not actual printed books – under the current UK VAT legislation. The changes are due to come into effect in January 2015, but it remains to be seen how much of the changed tax rate the retailers will pass on to consumers.

For the present at least, ebooks will not enjoy the special VAT-exempt status that printed books have in the UK. Calls by some book retailers for this gap to be closed appear to have gone unheeded for now. It remains to be seen whether future Chancellors will accept the argument. This also takes a scapegoat out of the government’s hands, and likely spells an end to the incessant bashing of Amazon on tax grounds that has so beautified UK public debate of late. Have to look around for someone or something else now, guys.

1 Comment on UK budget means new ebook tax rates?

  1. Not taxing ebooks at the same rate as print books? Perhaps that due to a long outdated perception that ordinary people buy print while only those with lots of money buy readers for ebooks. Think of that very expensive, first-generation Kindle reader.

    You still see that with people who think cell phones are just for the rich and get outraged–yes outraged–when a drifter or homeless guy pulls out one. Hey, if you’re living on the street, a cell phone is almost a necessity. How else can someone reach you? You have no place for a wired phone. No apartment at which to get mail. That prepay phone is a lifeline.

    In reality, a lot of people who read a lot have gone digital because they do NOT have much money. Many ebooks are free. Most others are cheaper than their print version.

    I suspect this is a UK illustration of a common phenomena in politics. The Big Politician lives in a bubble, surrounded by a host of staff who cater to his (or her) every whim. Even the budget realities that business executives have to face aren’t a problem. If you’re government, you can always tax more or, if that fails, just go deeper and deeper into debt.

    The unfortunate fact behind this silliness is that more taxes mean less of something. These high taxes will discourage British publishers (but not their American competitors) to shy away from going digital.

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