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UK to End VAT on eBooks (But Not Audiobooks)

After a decade of lobbying bu authors and book publishers, the UK government announced this week that the Value Added Tax collected on the sale of ebooks would be reduced to zero starting on 1 December 2020.

The UK Publishers Association is overjoyed, but I see this as a glass half full.

“We are delighted that the Government has decided to zero-rate VAT on digital books and journals in the Budget," Stephen Lotinga, CEO of the Publishers Association, said in a statement. "It’s fantastic that the Chancellor has acknowledged the value of reading. The decision to axe the reading tax will bring an end to the illogical and unfair tax on those who need or prefer to read digitally and should contribute to an increase in literacy in the UK. We want to thank all the parliamentarians, organisations and individuals who have supported this campaign and helped make the case for change – we look forward to continuing the important work of making reading accessible for all.”

Under the old rules no VAT was collected on print books sold in the UK, while 20% of the price of an ebook was paid to the UK government. (Yes, the UK has the equivalent of what in the USA would be a 25% national sales tax.) Print books had a 0% VAT rate due to an elitist and archaic belief that books were unique cultural objects. At the same time, ebooks were classified as software.

While this change would appear to be good news, the RNIB reminds us that the glass is only half full. Only ebooks will be getting the zero VAT under the new rule, but audiobooks will not. Speaking in their role as advocates for the visually impaired, the RNIB has a problem with this development:

While we welcome the announcement of a VAT exemption on e-publications, we are disappointed that it appears this won’t be extended to audiobooks. Printed books, magazines and newspapers have been VAT exempt since the 1970s, because it was recognised that there shouldn’t be a tax on reading.

The change recognises the unfairness of taxing some alternative formats and will help widen access for blind and partially sighted people who use e-Readers. However, for many people living with sight loss, audiobooks are their preferred format and allow them to enjoy their favourite titles in the same way as everyone else. It’s not right that they will continue to be charged 20 per cent more for books, and we urge the Government to make sure that audiobooks are included in the exemption.

I don’t know what is more ridiculous, that the UK made this change twenty years after it was obviously a good idea, or that they still managed to screw it up.

Talk about being a day late and a dollar short.

image by Raymond Snijders via Flickr

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Mike Hall March 13, 2020 um 5:46 am

You are being rather unfair in blaming the British government for making this change 20 years too late as EU rules prevented any reduction before October 2018 and from that date the allowed lower rate would still have had to be applied. The rate should have been cut to 5% in 2019 and the government can be blamed for not doing so then but I think that the zero rate had to wait until we left the EU.

Audio books are another matter. There has been no visible campaign for a tax cut and trying to draw the line between audio books and other audio visual products in the digital products VAT groups would be messy. I suspect that the government just does not want – or see the need – to go there. It’s not something that’s likely to get much traction in the mass media, e-books certainly did not, and the media reaction to these budget changes has mostly concentrated on the ending of the "tampon tax".

As for your saying that the UK has the equivalent of a 25% sales tax, I am confused. I can only assume that you are arguing thus: the price is £100, 20% VAT is £20 so the pre VAT price is £80 and the tax rate is £20/£80=25%. However, if the pre tax price were £80, VAT would be £16 and the price including VAT would be £96, which from my limited experience of buying things in the USA is exactly how a 20% US state sales tax would work.

Other than the rate it is a little simple minded to equate VAT and a US style sales tax because their underlying structure is completely different, but that’s not something for a blog post comment. Moreover, comparing rates for just one kind of tax can be highly misleading – yes the UK (like most of Europe) has a high VAT (sales tax) rate but no equivalent of state income taxes and I think property taxes are in general quite a bit lower.

Thomas March 14, 2020 um 9:44 am

The 25% vs 20% is due to a different way of calculating. You consider the VAT as a percentage of the total price. In the US, sales tax is an addition to the actual price of the item. In your example, if an item costs $80, the added tax would be $20, or 25% of the base price.

The reason we treat taxes as an addition is because the sales tax varies a bit from location to location. Sales taxes are not national, they are added by state, county, and city. One store might have a 10% total tax, while one in the next town might have only 8%.

Andrew H May 29, 2021 um 10:35 am

Charging VAT on audiobooks but not ebooks surely could be argued to be discriminatory against those who’s only way of consuming this media is via spoken word!

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