Revolution and Tax Avoidance

It started way back in 2000 with Stephen King. First came ‘Riding the Bullet’ then ‘The Plant’, the world’s very first mass market e-books. For those of you proudly detached from the digital world, an e-book is an electronic version of a printed book readable on computers, mobiles and the favourite new toy for commuters, the ‘e-reader’.

The rise of the e-book and e-reader has been hailed as key in ‘expanding the book world’. Unlike the CD and DVD revolution which condemned videos and tapes to the top shelves and attics of our homes, e-books have led to greater choice and accessibility for consumers and are gaining in popularity year on year. Here in the UK e-book sales account for 15% of the market and are expected to be worth nearly £260 million this year alone. In the US the e-book revolution is even greater; e-book sales overtook sales of paperbacks in February 2011. Sales from that single month had a total worth of $90.3 million (£55.2million). These new digital versions of books are transforming the way we consume literature; but the even bigger change is the way in which the digital revolution of the book world is rewriting the fundamental rules for writing and publishing. Large publishing houses, traditionally impenetrable for the majority of budding novelists, are now being undermined by writers’ growing ability to publish their own work online making it, with the right marketing, instantly available to a world-wide audience.

One of the main strengths of the digital book revolution is the low price at which consumer’s can sample new authors. Whilst well-known and successful authors, such as J.K. Rowling, are still able to demand hardback prices for e-books, novels from lesser known authors can be found at rock-bottom prices. In an online piece for The Observer, Anna Baddeley argued against the customer-friendly low prices of many e-books. The setting of low prices, she argues, though undoubtedly a good way to attract readers, does in fact devalue the product itself and undermines the amount of work and time put into writing a novel. Baddeley notes how cheap internet buys have meant that nearly a half of high street bookstores, around 2,000 shops, have closed down over the last six years.

There are many arguments on either side of the e-book debate, but, nonetheless the changing industry will have a lasting impact on the world of reading, writing and publishing.

One group that is reaping the biggest rewards during this boom in digital downloads is the web giant Amazon. The go-to site for students seeking cut price paper books has also been leading the charge in digital books. They hold a 58% share in the American e-book market whilst their ‘Kindle’, released in 2010, dominates the e-reader market; Barnes and Noble, whose e-reader, the ‘Nook’, is the Kindle’s closest competitor in the US, claims just a 27% share of the e-book market.

In the UK nearly one in every four books sold are purchased from Amazon, indeed their sales of e-books have increased so much that 114 e-books are sold for every 100 paper books. Amazon’s domination of internet retail has led to their profits from UK sales reaching the astronomical height of £3.3 billion last year. Yet despite the sheer amounts generated from sales in the UK the company did not pay a single penny of corporation tax for 2011. In yet another example of the tax loopholes unashamedly jumped through by major corporations, Amazon avoids paying any UK corporation tax by basing their headquarters in Luxembourg, a renowned tax haven where Amazon has only to pay a mere 3.5% worth of tax on their profits. Their UK arrangements are written off as ‘distribution centres’, not as handling direct profits.

The HMRC, along with a number of authorities in other countries, has begun an investigation into the tax arrangements of America, for instance, are investigating Amazon’s avoidance of their sales tax which the company dodges through the clever working of separate states’ tax laws.

While on the surface they do seem to be ‘on our side’ by offering discount prices, we must remember that Amazon is only able to do this due to blatant tax avoidance. Their ability to provide super quick delivery for free may place them above the rest, but their attitude to tax reserves them a place on the list with a multitude of other companies intent on profiteering at any expense.

BY: Louise Hill