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back to article Ebooks must stay fat with VAT, blame the EU, MPs told

When it comes to applying VAT to ebooks, the UK government remains bound by EU law, the Exchequer Secretary to the Treasury told MPs yesterday. In October 2010 HM Revenue & Customs described the process of supplying "text by electronic transmission" via the internet - such as Amazon flogging ebooks on its Kindle Store - as …

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Flame

Proof (it it were needed)

That there's nothing wrong with the environment.

Remember kids ... ignore what people say, and watch what they do.

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HMB
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Quite, See New Building Insulation

My gran has to spend a fair bit to keep her house warm, causing CO2 emissions of course. My friend who moved into a special eco development, does not have to pay much at all for heating.

My gran's house is fairly new, only a few years old.

One of the most dramatic ways of cutting our CO2 emissions would be legally mandatory high grade insulation for new homes that really wouldn't add that much to the cost of a house during construction. Do all new homes require excellent insulation? No.

The government seem most interested in being environmental when it involves taking more money off you.

P.S.

I know that the laws are getting better for required insulation, but it's too little and by no where near fast enough.

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Boffin

Sorry, but this appears to _support_ the idea of emissions tax - a paper book is a net carbon sink, for as long as it stays on your shelf without de-composing, whereas an eBook requires electricity to make, to transmit, and everytime it is read, which means more coal, oil, gas (and the odd bit of uranium) being burnt to produce that electrickery.

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FAIL

<chuckles/>

Really? You're seriously claiming that the few hundred grams of cellulose in a printed book count as a carbon sink, when that book got there via a chainsaw chopping down a slice of poplar - or whatever they farm these days to make paper - a truck trucking it to the paper mill, etc etc etc, a truck trucking it to the book shop and you buying it (ends with a paper receipt printed and possibly a plastic bag to carry it home) or Amazon mailing it to you (complete with paper parcel)? Not to mention the copies that go unsold, trucked back and forth from the paper mill or whatever, and similar issues... the electronic book, in all this, is a net winner.

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FAIL

Smells like hypocrisy to me.

Doesn't effect the banks therefore 'Only following orders' defence can be used.

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Anonymous Coward

stupidity

not only should ebooks be cheaper than paper books due to the lack of manufacturing required, but to lump VAT on too ...

And they say we should recycle more ...

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Vat wouldn't be a problem if the cost of an ebook reflected the production cost (i.e. considerably less than a paper back).

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Jad
Unhappy

RE: Cost of production

From what I've read elsewhere here on theRegister, only 20% of the cost of a printed book is the printing and shipping charges ... which is generally why ebooks cost the same as pbooks (20% VAT)

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Everyone seems to think...

...that removing the physical costs of production and distribution means there's a huge pot of cash being saved by us, the publishers. Everyone wants a slice: the authors and agents want better royalties, and the customers and retailers want lower prices.

In actuality, most of the cost of making a book is already spent by the time you even get to production. You're spending the money on advances, staff costs, freelance costs, permissions, etc etc. So when the files get forked off to print or epub conversion, despite the fact that the latter is largely gravy, you're still hoping that you're going to make a single figure profit margin, and that is for a Big Six publisher.

On ebooks we're paying double or triple to the author than we would on a printed book - say, 25% of receipts - the retailer's taking a big discount or commission, and the govt. is taking their VAT (which is usually less than 20% in fact, due to some arcane wrinkle that's too boring for me to actually take the time to understand.)

I agree that ebooks should be a little cheaper than print, because you're not getting the same kind of property rights as you have over print, and you're also talking about a less hand-crafted, less aesthetically-pleasing object. But please don't make assumptions about the economics of publishing if you've never actually read a publishing P&L statement.

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Boffin

Re: iucounu

yes but WHY is the author getting more? Did (s)he do any more for the e-book then the dead-tree book?

So, it me is SHOULD be 1/2 to 1/3 as much (before VAT). That's not a commentary on what I think the publisher should be getting, but a commentary on the fact that there is NO DIFFERENCE in the effort of the author/editor/legal/etc.

If your profit is staying the same while everyone else involved is going up then you publishing houses really do a crap job in your field.

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Stop

@iucounu

You're missing the point, with ANY sale you have to manage the customers expectation, it's completely irrelevant if you can explain where all the extra money goes, the man in the street says "I'm not getting anything physical, I shouldn't have to pay more" - end of.

This managing peoples expectations is why games consoles are (often) sold for less than they cost to build, why eat in and takeaway often cost the same, why people spend more on a Lexus than a Toyota, less on a Skoda than a VW, how Intel sell the identical chips from the same die at different speeds for sometimes vastly different amounts (my E5420's think they are E5472's, because they are!) - in other words, people are more than willing to pay over the odds for something they percieve has having a special value to them, and less for something that doesn't.

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Lobby for digital property

I'm not surprised they're slapping a VAT on ebooks because nobody is buying ebooks - they're buying software licences to read ebooks.

If people want to see ebooks stand a chance of being treated like regular books they should be lobbying the more technologically minded members of parliament to draw up a bill enshrining the concept of digital property into law and exempting digital books from VAT in the same way as physical books.

Then there is a clear incentive for booksellers and device manufacturers to sell digital property instead of licences because their prices will be cheaper than other sellers that stick with the licence model.

How digital property is implemented would be interesting and complex, but if bitcoin can manage ownership of virtual currency then I am certain that something is achievable with other forms of digital property.

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But if this were the case, then you'd have to pay VAT on £0, because they are not charging you to supply you with text, they are charging you a license fee. (How does VAT work on license fees?)

Presumably though if I buy an e-book which is just picures, since there's no text, there's no VAT?

However, since IP is "property", and copyright infrindgement is "theft" (of property), then I think enshringing digital items as property in law and with rights to use it sounds like an excellent plan.

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VAT on licence fees is 20%. VAT is 20% on everything that isn't listed as being chargeable at a lower rate. E-books with only pictures are not listed as being in the 5%, 0%, exempt or outside the scope categories for VAT, therefore it is chargeable at 20%.

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@BristolBachelor,

Plenty of services charge VAT, and an ebook license is a license is issued as part of a service (which includes storing and tracking your ebook library).

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Vic
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> they should be lobbying the more technologically minded members of parliament

Who's that, then?

I want to know if their Tippex bill went up or down once MPs were issued with laptops...

Vic.

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Vic
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> But if this were the case, then you'd have to pay VAT on £0

Nope.

> (How does VAT work on license fees?)

Full rate. 20% on the licence fee cost.

Vic.

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Anonymous Coward

Umm

Is that true of a licence too?

Since you seem to be interested in books, I take it you think you can spell, unless you are American.or you want to tax the verb.

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Angel

Buy the paper book and get the ebook for 'free'?

...and tick the box that says 'Please don't bother sending me the paper copy, I want to save trees.'

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Seriously, yes!

I'd love to see something where if you bought a book - perhaps only the hardback - you got the ebook for free. That would be truly excellent, and would almost certainly increase the sales of hardback books. People who think "I want to buy that book but I'll wait for the paperback becuase it's (a) cheaper and (b) lighter" might well think "but (a) I get two copies and (b) ebooks are very light - so I'll buy the hardback after all."

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Unhappy

Fail ...

If a book contains or is attached to a digital version - you pay VAT on the whole lot. Those of us who bought American books that had a CD in the back sleeve will remember.

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Free eBook with Hardback

simply buy a Bean published book if they can do it I donot see why other publishers cannot do it as well even if it is only the book that you have purchased Bean give you free copies of the authors books on a CD rom.

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Boffin

@Martin

Sitepoint (sometimes/always) provide an ebook (in several formats) version of every printed book that they sell.

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Well, yes, because VAT is really only charged on "non-essential" or "luxury" items. Although books are classified as essential in order to encourage people to read (a skill which I can easily see the justification as being essential), a Kindle reader or a PC aren't and it's hard to class an ebook as essential if you require something "non-essential" in order to read the damn thing.

I see no reason to take VAT off it, either, whether we had existing agreements or not. If you classed an ebook as essential, then ebook readers of one kind or another would have to be VAT-free as well and that's just a silly loss of income. And although IT is pretty important in the modern world, it's far from "essential" at the moment because there's still whole groups of people who don't have computers at home. If IT is ever classed as "essential", then we generate a whole lot more problems like having to give everyone Internet access (and not being able to cut them off), having to subsidise PC's for the low-earners (parts of which we do already), more reliance on power networks, etc.

Seems like it wasn't really that tough a decision to make, or to see which way they'd go.

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FAIL

Careful thinking there's a reasoning to VAT

because you will end looking like a prize prat when you insist that only "essential" items are zero-rated, and then find the French managed to wangle *cake* to be essential.

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HMB
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A cheap tablet / reader + ebooks is far less expensive than paying for space in a physical property for bookshelves. Or are less well off people expected to burn their books after reading to keep warm?

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Trollface

@Lee

Presumably then clothes for adults are not essential (they attract VAT), so hence hence forth I will not be wearing any (especially to my court appearance!)

I can't see any flaws in your logic...

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Let them eat cake

Indeed. Hence the fact that McVities went to court to prove that a Jaffa Cake is not a biscuit - and therefore not subject to VAT.

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Yes, only essential items such as facelifts and yachts are zero rated.

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FAIL

As always, when it comes ot Europe....

The government talks twaddle. http://www.thebookseller.com/news/france-delays-e-book-vat-cut-2012.html

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Unhappy

Indeed

I liked this quote:

"Meanwhile, French president Nicolas Sarkozy yesterday commissioned former culture minister Jacques Toubon to lobby France’s 26 European Union partners, the European Commission and Parliament to introduce a reduced VAT rate for all electronic cultural goods and services sold across the EU."

Somehow I can guess which way the UK will vote.

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HMB
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Doesn't France routinely break European rules?

I mean seriously, they've been taken to court a few times by Europe. I wish the UK had that attitude more often if I'm honest.

I think that there are definitely good things that come from a united Europe, but I quite like a transparent, efficient, democratic government and that just doesn't feel like Europe to me.

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All of them do

Part of the brow beating on Sunday was that the eurozone states are going to sign up to have controlled budgets and deficits. What few mentioned is that _they already do_ under the original eurozone treaty.

The problem with that aspect of the treaty was that Germany and France both immediately broke the limits, and got no/inconsequential punishment. After that, neither France nor Germany had a leg to stand on when Italy, Greece et al all did the same.

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Anonymous Coward

@Tom 38

Your contention is that self-regulation doesn't work?

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Vic
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> Doesn't France routinely break European rules?

Much of Europe does.

I spent some time in Sardinia a few years back. Many of the locals I spoke to[1] were working jobs well below the minimum legal wage.

When I questioned this, there was but one reply - "we need these jobs, and if we don't take them, someone else will".

It is my opinion that this is the root of the UK's disagreements with Europe; we tend to have a very literal take on EU rules, whereas the rest of the continent sees them more as guidelines. Their way generally seems to work rather better...

Vic.

[1] This was about the time the UK was talking about introducing the minimum wage, so it was something I was interested in

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" we tend to have a very literal take on EU rules, whereas the rest of the continent sees them more as guidelines. Their way generally seems to work rather better..."

Doesn't seem that way to me. The eurozone is currently bankrupt because they all borrowed way beyond the limit on someone else's credit. The implications of this are *very* slowly dawning on politicians across the continent. The abuse that David Cameron got last weekend was more or less entirely because he refused to write them a blank cheque.

"I told you so." is not a foreign policy, but neither is "Wanna join our bankruptcy club?".

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Anonymous Coward

Not only VAT rated for UK sales ...

... but also they can't even play the trick of placing the server that you download from in Jersey

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They can play the trick of placing the server you download from in Luxembourg, where the VAT rate is 15%.

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Anonymous Coward

Channel Islands

are not in the EU

"Jersey is not a member state nor an associate member state of the European Union (EU). It is not part of the European Economic Area.". It has some sort of "special relationshiop".

Likewise for the Isle of Man (also not part of the UK).

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Easy way to even it out

just add VAT to books.

No more arguments

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adding vat to books will only kick off the schools into a "we cant afford to pay 20% more for our books" rant

closely followed by a "think of the children" argument

I do think they could move e-books into the zero rated (basic / essential) group of products simply because the majority of people have already got some form of device that can read them (especially as you work into younger demographics).

within arms length I have 3 devices that could (if I wanted them to) read e-books, they are used for my day to day work & entertainment.

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Are school purchases VAT-free...?

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Trollface

Pass the VAT on to the parents...

If they want their brats to read stuff, they can bloody well pay for it. If they think they can't afford it, they're losers anyway, and reading wouldn't help.

Cameron said 'NO' to all this german-french bank shit, why can't he say 'NO' to this sarkozy-merkel VAT law?

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No, and they can't claim back VAT on any purchases they make.

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Unhappy

Nice green thinking by the Eurocrats there...

It's this sort of blithering idiocy that engenders Euroscepticism. A lovely anti-envrionmentalist policy for all.

I'm all in favour of charging a value-add tax on the reader, but on the content? It just betrays a complete failure to understand on the part of the politicians involved.

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Anonymous Coward

I'll ammend his comments

"Existing agreements with our EU partners do not allow the UK or other member states to introduce a new zero-rate or extend an existing one to relieve ebooks from VAT....which suits us fine thanks."

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You'll never buy a used e-book

I'd rather buy a used, dog-eared copy for a few quid from an Amazon reseller than pay full price for a book, and certainly wouldn't cough up for an e-book under any circumstances. The extra VAT just adds one more barrier I won't cross.

For some reason I really don't feel the need to carry around hundreds of books in one device - my reading habits are simple: I read a novel until I'm done, then I find another one and read that. Not being able to share, lend or sell my books also doesn't sit well with me. Books are just nice to have, even when (especially when?) they're second hand, so forgive me for my one concession to Luddite tendencies.

PS Books make good Christmas presents. E-books do not.

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Anonymous Coward

Nook

My wife, like you is a serial reader and a dipper: the Nook failed due to choosing between high power consumption or slow wake-up losing too much of her dip time.

My wife buys a book (often from the bargain bin - it's a book, it takes months or years to write and people have to have the hardback right now?) and reads it.

Then she lends the books to colleagues and friends.

Then she takes them to her school for students to borrow them.

Finally, if they're still in her "library" and no longer being read she donates them to Goodwill* or the box at the local supermarket.

Dead tree: 1 book, multiple readers before the final donation.

Nook e-books: 1 book, one reader. Or possibly 2 readers if the publisher kindly gives their permission. And the e-book isn't much cheaper, if at all.

I like the basic idea of e-readers, but the model doesn't work for everybody. How long Facebook add Facebookclub and allows sharing amongst a reasonable, limited, group of Friends before finally donating it to a subscribed library.

* I'm in Merkinland.

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Anonymous Coward

Except for...

reference books. I have several techie books on my kindle that I often dip in and out. Save's lugging 5000 pages worth of paper around.

Then of course there are the lovely free classics, just about to read The Time machine again.

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my petition

For what its worth I have an e petition on this. All Customs and Excise have to do is to define a book by content not medium. It seems our bureaucrats are stuck in the paper and red tape age.

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