VAT concerns for Scotland 'Yes' vote

VAT concerns for Scotland 'Yes' vote

Concerns have been raised over the book trade implications of a "Yes" vote in the Scottish independence referendum, with the introduction of VAT on printed books set to "affect all bookshops and publishers north of the border if the Scottish electorate votes for independence", according to a group from the trade.

Rosamund de la Hay of The Mainstreet Trading Company, Jill Pattle of Far From the Madding Crowd in Linlithgow, Birlinn m.d. Hugh Andrew, Marie Moser of The Edinburgh Bookshop and Vicky Dawson of Yeadons of Elgin & Banchory are among those expressing their concerns. However a Scottish government spokesperson has disputed their conclusions, saying that an independent Scotland would "inherit the existing tax regime, including VAT."

In an open letter to The Bookseller [reproduced in full below], the booksellers and publishers warn: "The UK and Ireland enjoy a 0% rate on print books unlike the rest of the EU where VAT is applied at varying rates, but no less than 5% (except of course Luxembourg where Amazon enjoy their 3% rate, at least until 1st January 2015). Any newly independent state of Scotland reapplying for membership of the EU would be required to apply VAT on books. In fact, according to European Commissioner for Enlargement Stefan Fule, new EU members must apply a 15% minimum. The Commissioner said Scotland, if it joins through the normal accession route, would have  to apply the standard minimum 15% VAT rates with just 'one or two reduced VAT rates set no lower than 5% for a certain limited list of supplies'."

A minimum of 5% would therefore be levied on books.

The group state: "Bookshops would be faced with either applying the VAT required, i.e. many hours spent pricing books, only to reinforce the view that Amazon is the cheaper option and, in all likelihood, tip those loyal customers over to the dark side. Or absorb the VAT and, in many cases, render themselves unprofitable at a stroke with the double hit of losing 5% per sale, and paying the publishers 5% VAT on purchase."  

"Reading and education have always been a matter of passion and pride in Scotland (hence the lack of tuition fees for further education courses) and it would be tragic if the nation's love of literacy were undermined by such a charge," the letter concludes.

Commenting on the situation, Booksellers Association president Tim Godfray said: "In no way is the BA taking sides – our view is, it is up to the Scottish electorate to decide which way they want to go. But on the reality of the situation, yes, our understanding is very clear – if Scotland does elect to break away and become independent, the VAT situation on books changes. Our information is that new EU members would have to apply a 15% minimum VAT rate for books (although it might be possible, as a special concession, for print books to go into the reduced band of goods and services carrying a minimum VAT rate of 5% - but this is not a certainty). It would be very difficult – if not impossible – for Scottish booksellers to absorb this VAT.  Scottish consumers, therefore, would find the UK booksellers offering lower prices.  You would have, in effect, a distortion of competition between adjacent countries."

However a Scottish Government spokesman has disputed the group's conclusions, saying: “An independent Scotland will inherit the existing tax regime, including VAT, and there is no reason to suppose VAT would be charged on book sales. All but two of the EU’s 28 member states currently charge reduced or zero VAT on books, and there is no reason why an independent Scotland would be treated differently from all other member states.

“Scotland is already part of the EU, and we propose a transition to independent membership based on the EU Treaty provisions that currently apply to Scotland under our present status as part of the UK, including on taxation, with no detriment to other member states.”

Marion Sinclair, chief executive of Publishing Scotland, said the situation was not clear-cut. "Our position is that we are a membership body and as our members are divided we are fairly neutral, so haven't entered into a debate. It is a contested area for politicians from the main parties - on the one hand it is argued that Scotland will accede as a new nation [and so VAT will be imposed], but the SNP says we will simply take forward existing rates. There isn't any clarity. There is uncertainty and confusion surrounding it and we would like to have clarity. At the end, it's a political decision and probably a matter for negotiation."

Lin Anderson of the Society of Authors in Scotland said: "I wouldn't presume to speak for all SoA members in Scotland. However as an author, I would say that I hope, should the Scottish people decide to vote in favour of independence, that any future Scottish government would do everything in its power to maintain a zero VAT rating on books."

Publishers Association chief executive Richard Mollet said: "The UK has a proud tradition of having a zero rate of VAT on physical books, reflecting the view that the tax should not act as a disincentive to reading and learning.  With only 50% of people in the UK reading on a weekly basis and literacy levels requiring significant improvement, anything which could discourage reading is of concern”.

A group of high-profile authors earlier backed a call for the Scottish electorate to vote "No" in the referendum, saying: "What unites us is much greater than what divides us. Let's stay together."  


Full text of letter:


While bookshops may be enjoying strong sales of ‘referendum’ titles, as noted in Lisa Campbell’s recent article, we felt it was important to highlight one issue raised at a Creative Industries Question-time event organised by Publishing Scotland in May this year.  It is an issue that will affect all bookshops and publishers north of the border if the Scottish electorate votes for independence.

We are not going to attempt to address the wider subject within this letter, but simply that of VAT on books.  The UK and Ireland enjoy a 0% rate on print books unlike the rest of the EU where VAT is applied at varying rates, but no less than 5% (except of course Luxembourg where Amazon enjoy their 3% rate, at least until 1st Jan 2015).  Any newly independent state of Scotland reapplying for membership of the EU would be required to apply VAT on books, in fact according to European Commissioner for Enlargement Stefan Fule, new EU members must apply a 15 per cent minimum.  The Commissioner said Scotland, if it joins through the normal accession route, would have to apply the standard minimum 15 per cent VAT rate with just “one or two reduced VAT rates set no lower than 5 per cent for a certain limited list of supplies”.

Let’s imagine what would happen to Scottish bookshops with an (optimistic) 5% VAT on books.  Bookshops would be faced with either applying the VAT required, ie. many hours spent pricing books, only to reinforce the view that Amazon is the cheaper option and, in all likelihood, tip those loyal customers over to the dark side.  Or absorb the VAT and, in many cases, render themselves unprofitable at a stroke with the double hit of losing 5% per sale, and paying the publishers 5% VAT on purchase (many independent booksellers are not VAT registered, therefore unable to claim this back).

This is not intended as a political comment (in and of itself, this is certainly not an issue to determine which way to vote), more ensuring that all parties are aware of the specific risk to our sector.  Reading and education have always been a matter of passion and pride in Scotland, (hence the lack tuition fees for further education courses), and it would be tragic if the nation's love of literacy were undermined by such a charge.
 
Yours sincerely
 
 
Rosamund de la Hey – The Mainstreet Trading Company
Jill Pattle – Far From the Madding Crowd, Linlithgow
Hugh Andrew – Birlinn
Sally Pattle – Birlinn
Tom Johnstone – Birlinn
Jude Innes – J & G Innes Ltd
Chris McCosh – Atkinson Pryce
Anna Murphy – Anna Murphy Sales & Marketing
Mick Fawcett – HarperCollins
Marie Moser – The Edinburgh Bookshop
Vicky Dawson – Yeadons of Elgin & Banchory
Joanne Macleod - Birlinn