The UK government has ‘fast-tracked’ its plan to end VAT on ebooks and digital newspapers and the rate of tax has been slashed from 20% to zero from May 1, 2020.
It means that Amazon has cut the minimum price that authors can set for ebooks on Kindle Direct Publishing in the UK from £0.99 to £0.77 for the 35% royalty option and from £1.99 to £1.77 for the 70% option.
It was originally intended to scrap VAT on ebooks in the UK from December 2020 but the move has been brought forward to help readers staying at home in the coronavirus lockdown.
VAT on ebooks has been reduced across Europe in recent months and although there are differing rates, Amazon has set the new minimum ebook price for Germany, France, Spain, Italy and the Netherlands all at €0.89 for 35% royalties and €2.69 for 70% royalties.
In theory, the UK move could cut the cost of a £12 ebook by £2 and e-newspaper subscriptions by up to £25 a year. However, that really depends on whether the big traditional publishers make the price reductions. It’s really only the big publishers who offer ebooks at prices of £10 or higher and they may opt to continue with their previous prices.
The UK government is also spending up to £35 million on newspaper advertising over the next three months as part of its Covid-19 communications campaign of guidance and advice.
It says the tax cut will reduce the cost of ebooks and newspapers and make reading more accessible as people stay at home and newspapers, which have been hard-hit by the virus lockdown will get £35 million additional government advertising revenue.
HM Treasury says, on average, publishers are reporting an increase of about a third in ebook consumption during the crisis, with some publishers reporting as much as a 50% increase.
The £35 million extra advertising revenue will be split between local, regional and national print media. These plans will be reviewed over the next three months to ensure the campaign is as effective as possible.
Stephen Lotinga, CEO of the Publishers Association, says, ‘We welcome the news that the government has taken this step to significantly fast-track their plans to scrap VAT on ebooks. This is a boost to publishers, readers and authors which is especially important at this difficult time. We hope that it will enable more people to easily access and benefit from the comfort, entertainment and knowledge that books provide.’
Isobel Hunter, Chief Executive, Libraries Connected, says, ‘Since libraries closed their doors in March, e-lending has boomed as people have turned to reading for education, entertainment and solace. E-memberships surged by 600% in the first week, and e-lending has now trebled. Removing VAT from ebook licensing will help libraries to support children learning at home and to put more titles into readers hands at a time when they need them the most.’