We are all aware that the EU VAT rules will change at the beginning
of 2015 and that this will effectively end the offshore tax loophole operations
of the ebook operators. This EU rule change will not impact the corporation tax
loophole and so we will not see a mass migration from those countries who offer
low corporation tax today, but it demonstrates that the EU as a block has the
ability when pushed to change the rules.
The EU official statement is available on their taxation and
customs site. http://ec.europa.eu/taxation_customs/taxation/vat/traders/e-commerce/
What it mean is that EU operators have to pay VAT at the
point of consumption not at the point of dispatch and operations. They also no
longer have to any VAT on consumption outside the EU which may be advantageous,
but doesn’t not mean that the non EU country will not charge their own tax on digital
services. Those supplying from outside the EU will be charged at point of
consumption. A long overdue level playing field even though it is some 15
months away.
All operators will now have to amend their systems to
operate and levy tax accordingly, which is not in itself a simple task.
This is going to be an interesting change to watch as those
with a large customer base in a high VAT country will have to either pass on
the hike in tax, absorb it or negotiate tighter supplier costs. We often
automatically expect the cost increase to be passed onto the consumer but with
digital ebooks this may not be as simple as that. As prices of ebooks continue
to fall, we are clearly seeing the emergence of price points and once these
start to be accepted by consumers, merely adding say 20% may not be palatable
and it could trigger of a further hike in the price wars. Those with deeper
pockets may elect to start to force a visible price difference and hurt the
margins of others who don’t have the flexibility to part absorb this drop in
profit, or the clout to get tighter cost prices.
Far from damaging Amazon this could damage others and in
fact strengthen Amazon’s grip on suppliers and appeal to consumers.
3 comments:
Does this apply to VAT on printed books or is this just ebooks?, what about bundles which include printed/ebooks, how are these handled? Sounds confusing.
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