We hate to be the harbingers of bad news, especially during the holiday season, but we've received some really disturbing news from Amazon that we have to pass along.
Effective Jan. 1, Amazon will begin charging VAT on e-books based on the buyer's country. Up until now, they've charged 3% VAT, which is the rate in Luxembourg, where Amazon EU is based. Beginning Jan. 1, e-books in the UK will be subject to a 20% tax instead of 3%. In Ireland, it's an appalling 23%.
Amazon has notified us that if we leave our e-book prices the same, Amazon will simply take the 20% out of the royalties it pays us. As it is, on most sales, Amazon keeps about 31% for itself; under our contracts, the author gets 25-30%. The little bit that's left goes to cover our costs for cover art, proofreading, digitization and conversion to MOBI and EPUB formats, and other costs, and a tiny profit to keep the lights on here at Valancourt Towers and keep new books coming out. Thus, on a given e-book, we get about 40% of the retail price. Under the new scheme, this would drop by half -- 20% going to VAT and the slender 20% that remains going to us. As a very, very, very, very small operation, we cannot possibly absorb a 50% decrease in our already modest revenues.
Therefore, unless the UK and other EU governments take action in the very near future to resolve this mess, we will be forced to raise our e-book prices in the UK and EU countries by as much as 20%. The UK's VAT on e-books is especially absurd, since the UK charges a 0% tax on print books.
We regret very much the prospect of increasing prices on UK/EU e-books, particularly since the entire raison d'être behind Valancourt Books has always been to make books available to everyone at the most affordable prices possible, but unfortunately, this issue is beyond our control....