Amazon is a pretty clever company; you could say it invented online retailing and, in doing so, changed the way people shopped. The Kindle device also changed the way we read. The other thing that it has been really good at is avoiding tax. In the US, it set up in the state of Washington so it could sell to customers in the more populous states tax free, and it’s rumored that founder Jeff Bezos originally wanted to set up on an Indian reservation in California because it was tax free. Well, in the UK, it’s done something similar, setting up in Luxembourg, which also has very low tax rates and, more importantly, the VAT on ebooks there is only 3% compared to 20% in the UK.
Last year Amazon’s UK turnover was over $5 billion and it paid no UK tax. Britain’s legislators are understandably unhappy with this and called Amazon before a parliamentary enquiry, together with Starbucks and Google. Andrew Cecil, Amazon’s director of public policy, was accused of being ‘deliberately evasive’ and displaying ‘outrageous’ ignorance after he failed to say how much profit is generated in Britain or who owns the online retailer’s Luxembourg-based holding company. France is also trying to collect $413 million in taxes it claims Amazon avoided through the Luxembourg arrangement.
In other big publishing news not unrelated to Amazon, Random House and Penguin Books have announced that the two companies will merge in the New Year. (Image sourced from this article, featuring logo design ideas from a select few graphic designers.)
The rationale, according to Penguin chairman John Makinson, is not about lack of confidence in the future of publishing – far from it. He says it’s about extending the range of publishing because the rapid digital transition has placed a premium on creative resources. On its own, Makinson, said Penguin wouldn’t have those resources, but together with Random they would.
Observers say that one of the drivers of the merger is the monopsony power of Amazon and their dictating of terms to their suppliers. In the past, Amazon has removed from its website products of publishers who have offended it. Scribe’s Henry Rosenbloom laments the concentration of power on both sides of the fence and worries that this merger may be the precursor of one or two more. A diversity of dedicated publishers, readers, reviewers and booksellers, he argues, is essential for the best books and writing.
Many of us who have grown up with traditional media are anxious about its fate and none more so than those (and I include myself here) who have a vested interest in it. Restructuring such as the Random House/Penguin merger is probably inevitable; it may open up opportunities for smaller publishers, who are likely to be more nimble and responsive to authors and trends.
Mark Rubbo is the Managing Director of Readings