If you self publish through Amazon’s KDP program in the UK, the chances are you’re getting a better deal than mainstream publishers.
According to a report in today’s Guardian newspaper, Amazon UK begins negotiations with publishers on the basis that they must knock off 20% VAT (sales tax) from the wholesale price of their ebooks. When it comes to retailing the book though, Amazon charge the end customer just 3% VAT, and pocket the difference.
The loophole comes about because Amazon’s EU headquarters is based in Luxembourg, a country with an unusually low VAT rate. Under EU law, VAT is payable in the country the receiving company is registered in, not the country where the transaction actually takes place.
According to the newspaper, who claims to have seen a contract offered by Amazon to a publisher, the wholesale price they were willing to pay for an ebook retailing at £10 was just 80 pence, once all of the discounts and the higher rate of VAT had been taken into an account.
A self published author selling through KDP on the other hand, enjoys at least a 35% royalty rate, and can earn as much as 70% if their retail price falls within certain criteria.
For their part, Amazon say that their goal is “to make it easy for readers to discover and read the books they love by expanding access to millions of books in both digital and print.” They say that they’ve been able to do so “by focusing on innovation, as exemplified by Kindle, and by offering customers the widest selection at the best possible prices and service.”
Amazon has recently been criticised for (legally) avoiding paying corporation tax in the UK by means of it’s Luxembourg registration, just one of a number of large foreign companies accused of such activity in recent weeks. Others include Starbucks, Ikea, and eBay.
A wider issue of VAT on ebooks remains. In most of the EU, VAT is not charged on print books, but is payable on ebooks. This is a large part of the reason some ebooks cost more than their paper counterparts.