Books are my life. I spent my childhood in and out of libraries and bookstores, exploring the worlds and ideas of countless thinkers and writers. Today, books are my lifelihood, serving simultaneously as research material, entertainment, study guides, teachers and companions. Books made me who I am today, showing me worlds beyond this one, pointing to futures yet born and ill-lit histories, whispering hints to build bridges between today and tomorrow.
I believe in a world where books are cheaply and readily available. I believe in a world that values literacy and education, where the sum of human knowledge can be found at one’s fingertips. I believe in a world where technology can synergise with business and art. I believe in a world where artists can be paid fairly for their work, where readers can access high quality books at reasonable prices, where entrepreneurs need not pay unreasonable tax burden to enjoy the fruit of their labour. I believe that in this lifetime humanity has the power to make the first steps towards this new information revolution.
The new Value Added Tax threatens to undo all this. Previously, the European Union charges Value Added Tax based on the location of the seller. Now, VAT is charged according to the location of the buyer, and sellers are required to harvest the buyer’s data for VAT compliance. As TechCrunch notes, these rules present an onerous burden on small busineses–like virtually all indie writers–who now have to handle even more paperwork and reconsider pricing strategy.
As BuzzIndie points out, the new VAT rulings would crush indie writers, entrench major companies thanks to their ability to handle VAT, and open a whole host of legal ambiguities. The result is a #VATMESS that will not go away. Already, Amazon is taking advantage of its position by automatically raising prices for ebooks sold in Europe, and threatening to price-match ebooks should their bots find that an author charges lower prices elsewhere. Mark Coker from Smashwords predicts that the new VAT ruling will place a dampener on sales from Europe.
Yet I believe.
Independent writers like me face a dilemma: absorb the tax burden or pass on VAT to our European clients. From my perspective, it is incredibly tempting to just raise prices to meet the new VAT rulings, since I’m already slammed with a 30% withholding tax from the IRS.
Currently, I make far fewer royalties than my foreign peers. When I sell a book on Amazon or Smashwords, the distributor takes 30% of the proceeds. Of the 70% that remains, the IRS takes another 30%. This leaves me with a royalty rate of roughly 45%. With the new VAT ruling, VAT is subtracted first before all the other subtractions. Going with a European average of 20%, that means my royalties from European sales will hover at around 39.2%.
And I’m not talking about my own tax liabilities yet.
Still I believe.
This #VATMESS is going to take a long time to sort out. But I believe in a world where people do not have to choose between dinner and a book. I’ve had to make that choice too many times to wish it on anybody. And I believe in a world where a man should not have to put up with excessive demands for data and exorbitant taxes from foreign bureaucrats for the ‘privilege’ of doing business. The Internet and the indie publishing revolution promised an end to such nonsense, and I will keep to this.
I believe. And this is why I will be absorbing VAT.
I will not be adjusting the prices of my ebooks on Smashwords to account for a policy I’ve had no say in. Amazon has automatically raised the prices of my ebooks on Europe; when their bots find the lower prices on Smashwords I fully expect them to lower my prices on Amazon automatically. I don’t see a point in investing the time needed to manually set lower prices on Amazon for each European country to meet different VAT regimes and periodically update them to account for fluctuating exchange rates (I have to think in three currencies when setting prices!) when my European sales via Kindle are practically nil. I’d rather focus my energies on directing European customers to places where they won’t have to pay elevated taxes, such as Payhip.
Previously, I sold ebooks through Gumroad, Sellfy and CoinLock. Neither Coinlock nor Gumroad would help me sort out the #VATMESS, effectively forcing me to maintain huge customer databases, capture addresses and determine how much tax should go to which country in Europe. I do not have the time or ability to do this, so I have closed these avenues of sale. As for Sellfy, I wasn’t too impressed with the marketplace and (lack of) categorisation for ebooks.
Therefore, I have consolidated direct purchases through Payhip. Payhip charges a flat 5% fee of the gross sale price for each transaction through Paypal. It also promises to handle VAT paperwork. It’s a godsend for writers like me, allowing me to focus on writing instead of paperwork, while still earning much higher royalties than the major distributors. My Payhip prices will be inclusive of VAT, so all my customers should see the same price regardless of where they are.
Payhip also allows me to do neat things like social discounts. If you share my Payhip ebook links on Facebook or Twitter, you will enjoy a 30% discount. Here are the links to At All Costs, American Sons and Keepers of the Flame.
I hope you will enjoy these stories. Together, I believe we can build a better world, a world where the politicians regret the #VATMESS they have created and small businesses can get on with delivering content instead of paperwork.