A stealth tax on reading

March 26, 2012 3:57 PM

Back in 2010, I posted a blog on the fact that ebooks are taxed at the normal VAT rate while regular books are VAT free. Since that post VAT has risen to 20% and, disappointingly, the Chancellor of the Exchequer has yet to remove VAT on eBooks. It is still ridiculous that the UK treats the taxation of physical books and ebooks differently.

VAT charging amounts to a stealth tax on reading. A recent market study shows that UK based readers are buying more ebooks year on year.  And much like the digital music industry, though the price of an ebook is less than the price of a physical copy of the same book, the volume of sales is rising. Twenty pence adds a significant amount to the price that consumers will pay. Ebook vendors won’t absorb that price as they can’t afford to at the moment since the market is still emerging. Why should the Treasury impact a growing industry which is, in part, accounting for the growth of the UK digital economy?

It would be an easy way to simplify the tax system to scrap VAT on ebooks . In taxing ebooks the Treasury picks winners in the overall book market. But it also does another thing – it discourages the use of ebooks in educations, charities and small businesses. It is in these organisations that we will continue to see lower adoption rates of ebooks even though using ebooks would be an easier and cheaper way to use digital publications. In a country that is already behind in integrating ICT to schools it is unreasonable to keep in place yet another barrier.Back in 2010, I posted a blog on the fact that ebooks are taxed at the normal VAT rate while regular books are VAT free. Since that post VAT has risen to 20% and, disappointingly, the Chancellor of the Exchequer has yet to remove VAT on eBooks. It is still ridiculous that the UK treats the taxation of physical books and ebooks differently.

VAT charging amounts to a stealth tax on reading. A recent market study shows that UK based readers are buying more ebooks year on year.  And much like the digital music industry, though the price of an ebook is less than the price of a physical copy of the same book, the volume of sales is rising. Twenty pence adds a significant amount to the price that consumers will pay. Ebook vendors won’t absorb that price as they can’t afford to at the moment since the market is still emerging. Why should the Treasury impact a growing industry which is, in part, accounting for the growth of the UK digital economy?

It would be an easy way to simplify the tax system to scrap VAT on ebooks . In taxing ebooks the Treasury picks winners in the overall book market. But it also does another thing – it discourages the use of ebooks in educations, charities and small businesses. It is in these organisations that we will continue to see lower adoption rates of ebooks even though using ebooks would be an easier and cheaper way to use digital publications. In a country that is already behind in integrating ICT to schools it is unreasonable to keep in place yet another barrier.

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