VAT changes are a real blow to self-published authors

The closure of the loophole whereby Amazon routed EU online sales through Luxembourg has had an unintended negative effect on writers

Anna Baddeley

Until 1 January this year, a self-published author or small independent publisher had a couple of choices for where to sell their ebooks. The most obvious, and easiest, was through a big platform such as Amazon, Nook, Kobo, Google or iTunes. These companies took a sizeable cut of sales, and had terms and conditions that could change at any time, but it was worth it for the exposure.

Authors also had another option: to sell ebooks to readers directly through their own website. This required the wherewithal to format an ebook file and set up a PayPal plug-in, but it meant that authors got all the money from book sales, and were protected from the whims of the big retailers.

Then things changed. Amazon, you may recall, had been criticised for taking advantage of LuxembourgÔÇÖs 3% VAT rate to undercut competition (UK-based retailers had to add 20% VAT to ebooks). To fix this situation, the European commission changed the law so that retailers of digital goods had to pay VAT in the country where the product was bought, not where it was sold.

All fair and square? Not really. For microbusinesses faced with the job of calculating myriad tax rates, the new regime is an administrative nightmare. Author Cory Doctorow said he was forced to spend £700 on software and accountancy fees. Also, whereas businesses with an annual turnover of less than £81,000 used to be exempt from VAT, now if they sell even one ebook or audiobook to a customer outside the UK they must apply VAT to all UK sales too. For many, the only feasible option is to sell through Amazon or another large retailer.

The European parliament says it is investigating reduced rates for ebooks. In the meantime, a law ostensibly designed to reduce the dominance of big corporations will likely result in their becoming even stronger.