Posts Tagged ‘Luxembourg’

Let’s get this straight — I love America. It’s a great place; brash, confident, a can-do country. If a British business fails, the humiliation and disgrace is a permanent stain. If an American business fails, they pick themselves up, dust themselves down, and start all over again. And some of my best friends are Americans, as you’d expect me to say.

In fact it was my American friend Martha Moran who alerted me to this extraordinary story, an unprecedented combination (to my mind) of ignorance, hubris, licit connivance and venality.

Photographer Udi Tirosh posted this blog. It describes how the US Patent & Trademark Office has awarded a patent to Amazon for photographing things against a white background. That’s right — a patent on what we call cut-outs. The imagery that made Dorling Kindersley books famous around the world.

How can they get away with this? What effect will it have? The darker side of American business confidence also lies in this “let’s try it on” attitude. And all too often the American establishment colludes.

There’s much not to like about America. Deranged gun laws. The Albuquerque Police Department, who have shot dead 55 people since 2010. The US legal system. The $67 million claimed by a judge for a lost pair of trousers. Companies who attempt to copyright phrases in the English language. Bridgeman Art Library‘s case against Corel for nicking their images — Bridgeman was British, Corel won. The publishers of He’s So Fine sued George Harrison‘s Harrisongs for plagiarism with My Sweet Lord, which had one chord change in common. Harrison lost. The catastrophic Gulf oil spill caused by an American subsidiary of the British firm BP — BP was given a swingeing, humungous fine and ordered to pay billions of dollars of compensation, sometimes to people living a couple of hundred miles inland.

Every man, woman and child in the United Kingdom spends £70 a year with Amazon. It provides an amazing selection and a terrific service. Of course we buy from Amazon SARL in Luxembourg, not from Amazon.co.uk, which merely takes our order in the UK, locates the product in the UK and posts it out to us in the UK from within the UK.

In the past three years Amazon has generated sales of more than £7.6 billion in the UK, without paying any corporation tax on the profits from those sales. They paid just £4.2 million in tax in 2013, 0.1% of their UK revenues.

And you know why? Because their tax advisors are smarter than our taxmen and our government. Amazon is doing nothing wrong. We are missing out because of the incompetence of our legislators and HMRC.

And can Dorling Kindersley now expect Amazon to come knocking?

Printed books are zero-rated for VAT in the UK. Ebooks are taxed at 20%.

Publishers have taken a softly-softly approach to VAT on ebooks, fearful that if they kick up too much of a fuss the Government will awaken to the fact that printed books are presently zero-rated and slap 20% on them overnight.

Such a move would decimate the British publishing industry — and by extension picture libraries, photographers and all the industry’s ancillary suppliers would take a huge hit. It’s therefore unlikely to happen, but who can predict what a politician may take into his head to do.

City law firm Berwin Leighton Paisner has announced on its website:

VAT treatment of ebooks – The firm is taking a groundbreaking case challenging HMRC’s view that ebooks are standard-rated for VAT purposes, in contrast with physical books which are zero-rated.”

Hard-nosed commercial firms like BLP do not take cases on pro bono, or challenge national or international law simply for the greater good. Therefore they’re doing this for one of their clients, and that client will have deep, deep pockets.

Who can it be? Who will benefit?

Well, the consumer will benefit if prices fall by 20% (they won’t). Publishers will benefit from a boost in sales.

But by far the biggest beneficiaries will be the retailers. Apple sells ebooks. Tesco sells ebooks. They will both see a hike in profits. BLP numbers Apple and Tesco among its gilt-edged list of clients.

Our digital publishing company Heritage Ebooks sells 50 illustrated ebooks from its site for every one ebook sold by the rest of the UK’s ebook sales outlets — Waterstones, Foyles, Tescos and so on — put together.

And for every one of our ebooks that we sell from our site, Amazon will sell twelve from theirs.

It is disproportionately huge. OK, so we’re tiddlers, microbes even, but I expect the proportions are similar whatever you publish.

Amazon has been subject to much opprobrium and contumely for selling ebooks to UK customers and charging the full 20% VAT while taking advantage of the 3% VAT they pay as a company based in Luxembourg. Like Starbucks, Macdonalds and KFC, large American companies have an aversion to paying their fair share of tax in Europe, and as their lawyers and accountants are sharper than ours, they can get away with it.

And now some organisation, through BLP, is challenging HMRC’s ruling on the grounds that charging different rates of VAT on print books and ebooks breaches EU law on fiscal neutrality.

Come on, this has to be Amazon. Who else could afford such a suit? And who else would profit more?

Amazon charge us, the publisher, for the bandwidth used when a customer buys and downloads a Heritage Ebook from them. Because our ebooks are highly illustrated, they have large filesizes and therefore incur high bandwidth usage fees. And because one or two books are downloaded via 3G rather than broadband, Amazon charges us across the board at mobile phone companies’ bandwidth fees.

The result is that for two of our titles, we are losing 10p on every sale made through Amazon because of their charges. Amazon are thereby forcing us to raise our prices.

And I thought their intention was to drive prices down.