The cost of eBooks are poised to dramatically increase at the beginning of the new year, due to changes in VAT. Readers will end up having to pay anywhere from 17% to 25% more on each title, depending on the country they live in.
The European Commission recently unveiled a new ruling where member states will be taxed in the European member state in which the consumer is located, as opposed to the country from which the product is sold. Starting in January 2015 the new tax rates will be in effect for eBooks.
The new VAT laws will prevent Amazon, Nook and Kobo from getting away with charging a paltry 3% tax on eBooks, magazines, graphic novels and newspapers sold to European countries, because their headquarters are in Luxembourg. In a few months, UK customers will have to pay the 20% VAT on eBooks from Amazon, instead of the 3%. This will increase eBooks accross the board by 17%.
The Luxembourg government stands to lose around €800 million a year from the ruling, while the UK and Germany stand to gain around €350 million each by the higher VAT rates.
Patrons of Amazon and Barnes and Noble in Europe are obviously going to be disgruntled that they will be paying more money for books, but the evening out of the VAT will allow Waterstones, Thalia, Txtr, Ciando, and Virtualo to compete better on price and hopefully gain more traction in the industry going forward.
In the United Kingdom Amazon accounts for 75% of all eBook sales. They have been able to capture the vast majority of readers due to the low prices and solid discovery experience. Will customers remain loyal if the prices increase dramatically?