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Amazon ebook tax loophole being contested by European commission

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Gallery Photo: Amazon Kindle Paperwhite review pictures
Gallery Photo: Amazon Kindle Paperwhite review pictures

The European commission has ordered Luxembourg to increase the rate that local retailers are charged when selling digital services, a change that will negatively affect Amazon's ebook profits if carried out. According to The Guardian, Amazon is currently registered as a Luxembourg company, allowing the retailer to enjoy the country's 3 percent VAT (Value Added Tax) charge when selling ebooks, while publishers based in other parts of Europe, the UK for example, are subject to charges of up to 20 percent. To make matters worse, British publishers that utilize Amazon for the sale of its digital titles are required to cover the 20 percent VAT charge, even though the online retailer only has to pay a fraction of that amount.

As a result, the European commission has given Luxembourg 30 days to raise its VAT charge for digital services to 15 percent, keeping it in line with other EU nations. Amazon will not be the only one to suffer from the adjustment, as companies like Skype and Netflix have also taken advantage of the country's tax loophole. France, which holds a 9 percent VAT, has also defended its rates, citing the discrepancy between the taxes on digital products and the lower charges associated with print mediums. It's possible that Amazon may also contest the demands, although the retailer has been less than successful in the fight against local taxes in the United States.