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October 22, 2012

Amazon eyes extra profit on UK ebooks sales

The plans are likely to impact the business of UK publishers

By CBR Staff Writer

Online retailer Amazon is planning to make extra profit on ebooks sold in the UK by forcing the publishers to cover the cost of a 20% VAT charge on the sales, according to the Guardian.

In 2006, Amazon moved its European headquarters to Luxembourg which allowed the company to pay only 3% VAT on digital books sold to British readers.

According to a contract seen by the Guardian, Amazon began talks with its publishers on the basis that the UK VAT rate of 20% must be knocked off the cost price.

The Guardian says Amazon negotiates further discounts on top of the VAT subsidy, which sometimes can result in publishers receiving less than 10% of the total sale price of a book.

The retailer sells nine out of 10 ebooks sold in the UK, according to some estimates.

Amazon was quoted by the Guardian as saying that the company’s goal is to make it easy for readers to discover and read the books they love by expanding access to millions of books in both digital and print.

"We’ve been able to do this by focusing on innovation, as exemplified by Kindle, and by offering customers the widest selection at the best possible prices and service,"Amazon said.

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Last year, Amazon generated sales of over £3.3bn through its UK website.

Earlier this month, the retailer had revealed its plan to launch the new Kindle Fire HD tablet and Kindle Paperwhite e-readers on 25 October 2012 in the UK.

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