Amazon is to be stripped of its tax advantage on the sales of electronic books after the European commission ordered Luxembourg to close a VAT loophole.
is registered as a Luxembourg company and pays that country's VAT
charge of 3% when it sells an ebook to a British reader, rather than the
20% it would have to charge if it were UK-based.
The Guardian claimed this week that Amazon is forcing British publishers to cover the cost of a 20% VAT charge on ebook sales even though the true VAT cost to the online retailer is a fraction of that.
The European commission – which oversees European Union
law as the EU's executive arm – on Wednesday gave Luxembourg 30 days to
increase its VAT rate on digital services from 3% to 15%. This will
close a tax loophole that has encouraged companies such as Amazon, Skype
and Netflix to be based in Luxembourg to benefit from the 3% rate when
selling throughout the EU. Luxembourg must agree to change its VAT rate
before the end of November, or face being referred to the European court
of justice and risk fines. France has also been issued with a similar
warning over its 7% rate for digital services.