Comments on: The Guardian: Amazon overholding on VAT for UK publishers? http://ilmk.wordpress.com/2012/10/22/the-guardian-amazon-overholding-on-vat-for-uk-publishers/ Fun and information about the Kindle and the world of e-books Wed, 19 Jun 2013 02:22:38 +0000 hourly 1 http://wordpress.com/ By: Bufo Calvin http://ilmk.wordpress.com/2012/10/22/the-guardian-amazon-overholding-on-vat-for-uk-publishers/#comment-36484 Tue, 23 Oct 2012 12:30:55 +0000 http://ilmk.wordpress.com/?p=9741#comment-36484 Thanks for writing, Edward!

I appreciate that analysis. As I said, I don’t know it at all well. :)

]]> By: Edward Boyhan http://ilmk.wordpress.com/2012/10/22/the-guardian-amazon-overholding-on-vat-for-uk-publishers/#comment-36464 Tue, 23 Oct 2012 05:34:02 +0000 http://ilmk.wordpress.com/?p=9741#comment-36464 I’m not a tax expert by any means, but I suspect that there a couple of errors in the Guardian’s analysis. I refer you to the following:
http://en.wikipedia.org/wiki/European_Union_value_added_tax
First Luxembourg VAT is 15% not generally 3% (only for certain exceptions which I don’t believe covers Amazon). Final (output) sales to consumers are charged the VAT rate of the consumers domicile not that of the supplier. Ebooks could be regarded as a “service” in which case the VAT would be at the rate of the domicile of the supplier — except that there is a long laundry list of exceptions where the VAT applied is that of the consumer’s locale. Most of these exceptions include almost all of the services that a normal person might utilize including “electronic” services i.e. ebooks..

Notwithstanding all of that what the Guardian appears to be talking about is not really the actual VAT collected and/or paid to a governmental entity, but rather the negotiation between Amazon and a publisher over what Amazon will pay the publisher for their product (sounded like a consignment rather than an agency discussion to me). As part of this negotiation Amazon would include a VAT rate that they would have to pay upon final sale as part of a “discount” in arriving at a reasonable consignment price. The final price paid by the consumer would be: consignment price+Amazon markup/down+VAT. In this kind of negotiation where most of Amazon’s sales are English language product sold mostly to UK citizens using the UK VAT rate of 20% appears to be quite reasonable.

The article then ends with a screed about how Amazon pay $0 on the profits earned from UK consumers, which evidences a poor understanding of the theory and practice of corporate taxation worldwide, which is a complex subject. Generally with the exception of the US (which taxes worldwide income no matter where earned), you pay your corporate taxes wherever the corporation is domiciled or has physical facilities. Which in the EU for Amazon is Luxembourg. Those EU earnings are added to their US taxable earnings (they get a credit for whatever they paid Luxembourg) for purposes of US corporate income taxes.

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