Beginning January 1st, 2015, prepare for E-book prices in the European Union (EU) to rise. There reason for increased e-book prices is because the EU is going to be changing the rules on Value Added Tax (VAT) that is require for e-book prices. Currently, e-book retailers like Amazon and Apple have been using the Distributor’s country of origin, Luxembourg, as the rate for VAT. Why choose Luxembourg, it is quite simple, they have the lowest VAT out of all EU countries at 3%.
The rules for online purchases are changing. Instead of being based on the distributor’s country of origin, VAT must now be based upon the purchaser’s country. This means that publishers will need to adjust their prices on Amazon and Apple.
Publishers should have received emails from both Amazon and Apple regarding these changes. Within Amazon’s email, they stated that they will automatically make the necessary adjustments, on or shortly after January 1st, 2015. However, Apple states:
The customer prices you deliver to iBooks are customer facing prices which include VAT, while Apple’s commission and the publisher’s proceeds are calculated after VAT is deducted. We will not be making any automatic adjustments to your prices to reflect any new VAT rates. Unless you update your prices on iBooks, your proceeds for some book sales in the EU may change.
See the table at the bottom of the page for what the new VAT rates will be in each country.
The differing approaches to e-book pricing has me thinking “Where should the burden lie for making adjustments to e-book prices?”. Should the burden be placed on the publisher to manually adjusts all of their prices, or should this be a service of the e-book distributor (Amazon and Apple). I am honestly not sure where the responsibility should be placed. Currently, if the publisher is solely responsible for setting prices, and the distributor does not modify the price in anyway, shape or form, as is the case with Apple, then the publisher should be responsible for setting the prices. However, if the distributor has ultimate discretion over pricing, as is the case with Amazon, then the distributor should be increasing the price.
There are some that will argue that the distributor should automatically be updating the price, and I can see this argument. However, Apple is forcing publishers to change their prices. With Apple, you can schedule the date that a new price goes into effect, so you do not have to do this on January 1st. Conversely, Amazon does not allow you to do this, likely why Amazon is going to handle updating the prices on the publisher’s behalf.
I have created an E-book pricing calculator, so you can calculate the minimum amount you would need to set your e-book at in each country in order to take into account of VAT, and maintain the same general revenue from each book sale.
|VAT Rate Applied to eBooks (By Country)|