Amazon requires British publishers to pay 20 % VAT on ebook sales

Amazon will make British publishers cover a 20 per cent VAT charge on all ebook sales,  even as the online retailer profits from a European tax anomaly, thanks to which it is required to pay 3 per cent VAT, Guardian.

The article referred to a contractual stipulation that necessitated publishers to begin negotiations with the online retailer at an already fixed price point; and with the aforementioned 20 per cent VAT accounted for.

However, the company was exempt from the VAT charge as its European base of operations was located in Luxembourg, and was required to pay a rate of 3 per cent (the domestic rate of taxation).

Amazon was estimated to net a profit of £1.38 for a £10 ebook sale with it sometimes charging 65 per cent (VAT included) by way of discounts.

The contract also prohibited publishers from offering better deals to competitors stating, ''If the base price exceeds the base price provided to a similar service then the base price hereunder will be deemed to be equal to such lower price, effective as of the date such lower price comes into effect."

Citing a publisher who refused a deal with Amazon as the deal would have resulted in a 92 per cent discount said,  that equated to a sales return of 80p for £10 ebook.