As per reports, Amazon.com, Inc.(NASDAQ:AMZN) is forcing British publishers to cover 20% VAT on eBook sales, although the company is entitles to pay 3% to Luxembourg.
The company is able to wield such power over publishers since it has a domination of the UK digital book publishing market. As per reliable sources, it sells nine out of 10 eBooks in the UK. It uses its Luxembourg tax status to wring more profitable terms from publishers.
Companies like Amazon collect the VAT levy from customers before transferring it to the government. In the case of Amazon’s eBook sales in the UK, it only needs to pass 3% to Luxembourg, had it been based in the UK, it had to pass over 20%.
As per a contract witnessed by the Guardian, Amazon starts negotiating with its publishers on the basis of that the UK VAT rate of 20% must be knocked off the cost price.
However, Amazon’s base in Luxembourg allows it to take advantage from a European tax anomaly and pay only 3% VAT on digital books that are sold to UK readers. Consequently, Amazon charges the difference between the UK VAT levy that is forced on publishers and the actual 3% it pays. This amounts to an extra 1.38 pounds of every profit every time it makes a sale of 10 pounds in this nation.
It then negotiates further significant discounts on top of the VAT subsidy, which in some cases can result in publishers getting less than 10% of the cost paid by online customers.
Publishers do not fall into the line that can be dealt with instantly.
Amazon holds a reputation for using its global scale to make the most competitive arrangements possible. None of its arrangements are illegitimate. Amazon would not reply to specific queries about its market share, VAT, its business practices and its agreements with publishers.