E-book prices stable following VAT hike

E-book prices stable following VAT hike

E-book prices have remained stable five days after a new law came into effect charging an extra 20% VAT on e-books from 1st January.

A survey of e-books by The Bookseller shows e-booksellers and publishers appear to have cushioned the impact of the VAT price rise on e-books at least for now, five days into the new rule.

As of 1st January, a European Union law, dating back to 2008 came into effect, charging customers VAT on digital “services” according to the country in which the consumer is located, as opposed to the country they are sold from. The new rule means companies such as Amazon, Apple, Nook and Kobo, whose European headquarters are based in Luxembourg, now have to apply a 20% VAT levy on e-books sold to customers in the UK, when they had previously paid only the 3% Luxembourg fee.

A survey of 168 e-books taken across-genres and from frontlist, mid-list and backlist and ranging from large to independent publishers (including those on agency), Amazon-published and self-published authors has found little change in prices from 23rd December to 2nd January and from 2nd to 5th January. The price stability suggests retailers, perhaps in conjunction with publishers, have worked together to cushion the extra tax costs.

Of the 17 traditionally published e-books available on Amazon.co.uk only two went up in price - You Are Here by Chris Hadfield (Macmillan), which rose from £6.29 to £6.64 and The Narrow Road to the Deep North by Richard Flanagan (Vintage), which rose from £5.99 to £6.29. Among the smaller publishers, of the 12 titles recorded, just two rose in price; The Gods of Olympus: A History (Profile) and The Swimmer by Joakim Zander (Head of Zeus).

It is impossible to say whether the prices rises are down to natural fluctuations in pricing, or because of the VAT increase: of the Amazon published books recorded, all of them increased in price but as a result of them leaving a £1 promotion. Of the KDP titles measured, only one increased in cost, Creating Money, Creating Meaning, by Orna Ross (Font Publications), which went up from £4.02 to £4.68. On the KDP community forums some writers did report on price rises impacting their backlist titles, but others reported no movement, suggesting that Amazon was staggering the changes.

The pattern was the same across other retailer websites. Of the 40 titles recorded on Kobo, just four saw price increases from 23rd December to 2nd January, including current bestsellers There's Something I've Been Dying to Tell You by Lynda Bellingham (Hodder), (up from £6.49 to £8.99), and Girl Online by Zoe Sugg (Penguin), (up from £4.99 to £6.49). However, both list prices of these titles had fallen again by 5th January albeit to prices still higher than the December listing, to £7.49 and £5.49 respectively.

In contrast, some other best-selling titles had gone down in price on the Kobo platform by 5th January, for example The Diary of a Wimpy Kid: The Long Haul by Jeff Kinney was down to £7.49 from £8.99 and Guy Martin’s My Autobiography was down from £9.99 to £8.49.

Previously publishers had pledged to try and avoid a price-hike following the new VAT rule, with a HarperCollins spokesperson saying the issue was “complex”, and there was “no one-size-fits-all solution, beyond the absolute assurance that we’re doing everything we can to minimise the impact on consumers while protecting our authors’ royalties.”

A spokesperson for Amazon has said: "There are many factors that go into the pricing of a digital product and we continue to work to keep prices low for customers as we always do." Kobo gave a similar reaction, suggesting publishers and retailers were working together to avoid a price hike which would hit consumers. “We will continue to work closely with our publisher partners, both agency and wholesale, to bring our customers the best possible offering,” Kobo said.

Richard Asquith, vice-president of global tax at online accounting service Avalara, said: “As predicted, prices haven’t moved, probably because most providers are looking at how their competitors will react, and if any one seller will start nudging up prices.  But it is inevitable that there will be some increases soon given the huge hike in VAT that the 2015 changes have forced on sellers.

We may yet see some more countries following Italy and Malta with their downgrade of e-books to the lower, printed books’ VAT rates.  It is really only the UK and Germany that is blocking this with the European Commission.”

Amazon has previously encouraged authors to keep list prices in line with what they were previously, with a note on its website saying: "Before January 1, 2015, to set a list price of £1.99, you had to enter £1.93 to ensure that your list price would be £1.99 once 3% VAT was applied. Now, you can simply enter £1.99, and your list price includes VAT.” However, that would means authors receive less royalty where VAT rates are higher than 3%.