Amazon has confirmed it will cut the price of its Kindle ebooks from Friday, after the government announced it would bring forward plans to stop charging VAT on online publications because of the pandemic.
The decision to remove the 20% VAT charged on online news subscriptions and books will bring them in line with their physical equivalents, which have always been zero-rated. Amazon said customers would very shortly start to notice the change, which will see the cost a £10 ebook reduced to £8.33.
“For titles where Amazon sets the price, we will reduce the prices of books not already on promotion,” said a spokesperson. “After receiving today’s notification, we are working as fast as possible to lower prices for customers.”
The move had initially been due to come into force in 2021 but has been brought forward by the Treasury amid the pandemic, with the media facing an uncertain financial future.
“We want to make it as easy as possible for people across the UK to get hold of the books they want whilst they are staying at home and saving lives,” said the chancellor, Rishi Sunak.
The government also announced plans to spend £35m on public information advertising in national and local newspapers over the next three months, which will help prop up outlets that have experienced a catastrophic loss of income since the start of the lockdown.
The decision to scrap VAT on online publications follows a long-running campaign by book publishers and newspapers, led by News UK, publisher of the Times. However, the exact definition of an “e-newspaper” or “e-magazine” still remains unclear, making it hard to say which outlets will benefit. It is expected to include any online publication which charges VAT on its subscriptions.
Representatives of the Times and Financial Times, two of the UK’s most popular paywalled news outlets, did not respond to requests for comment on whether they would be passing on the saving to consumers or using the extra money to reinvest in their journalism.
The parent company of the Guardian welcomed the move and said any extra money would go towards supporting the Guardian as it becomes increasingly reliant on direct financial support from readers.
“Modernising digital VAT laws to mirror the zero-rating applied to newspapers is vital as digital products and subscriptions evolve with consumer demand,” said a spokesperson. “The Guardian’s unique funding model means that any savings made as a result of this legal change will be reinvested into supporting more independent Guardian journalism.”
The Guardian does not pay VAT on reader contributions, but does pay VAT on subscriptions to its premium apps.
The £35m of advertising will go to 600 national, regional and local newspapers but a government spokesperson could not say whether hyperlocal or online-only outlets would benefit.
A spokesperson for News UK said the tax change would “enable current pricing to be sustained for as long as possible for the benefit of consumers and will maintain investment in the high quality journalism that our readers rely on”.