Contents

BrazilKey Indicators Values Sources,CommentsBook market size (p+e, atconsumer prices)Titles published per year(new and successiveeditions)New titles per 1 millioninhabitantseBook titles (available frompublishers)Key market parametersUS $3,716 million(publishers’ revenues)PublishNews57,473 PublishNews10925,000 Revolução eBook(commercial & free,May 2013)Books are tax-free;government salesaccount for 26.4% ofpublishers’ revenuesThe good problem of Brazilian taxesAmazon, Kobo, Apple, and Google have all complainedand keep complaining about the Brazilian tax system, andthat was the excuse for delays in launching locally. The taxproblem, however, is essentially a good one: books are taxfreein Brazil. That is, the only taxes a publisher pays are onearnings and personnel taxes—there are no VAT or salestaxes. This is true for printed books, but when it comes toereaders and ebooks, everything becomes complicated ifa company wants—and it should—to keep its tax-free status.So far, everyone is treating ebooks as tax-free products,just like their printed counterparts. Despite there being nowritten law guaranteeing that this will continue, everyoneis trusting in the spirit of the law. When it comes to ereaders,though, no one expects to sell or import them tax-freeunless the National Book Law is amended to include dedicatedreaders.The Brazilian senate is still discussing a bill that would officiallymake both ebooks and dedicated E-Ink readers taxfree.If the bill passes, the prices of E-Ink Kindles, Kobo devices,and Nooks would have to come down steadily. Importationtaxes on dedicated e-readers could be as highas 60 percent depending on how the ereader is categorizedwithin the broader field of electronics.What really complicates taxes in Brazil relates more closelyto ebook distribution models. Although books are tax-free,services are not. If one buys and sells books, no tax is involved,but if one classifies the distribution work as a service,one may pay up to a 14.25% tax on revenues. This isknown as ISS and PIS/Cofins. Of course, this challenges theagency model. Understandably, Brazilian publishers wantto control retail prices of ebooks to avoid deep discounting,and to avoid deep discounts, the agency model wouldbe perfect, especially if we assume only a standard 30%U.S.-style discount, which is much lower than the typical50 or 55% that big Brazilian retailers demand from publishers.This is what everyone thought at the beginning ofebook trade until an accountant told everyone that taxesshould be paid using the agency model. As if that were notenough, the market is still discussing whether the agencymodel is even legal in Brazil, and no one has emerged witha definitive answer.So far, the contracts signed by the large Brazilian publisherstend to follow the wholesale model, with the exceptionof Apple, which is technically selling Portuguese booksfrom abroad, making it easier to use the agency model.When negotiating with Amazon, the big publishers wereable to include a discount limitation on the contracts, creatingconsumer price control in a wholesale deal.Because books are not technically tax-free yet, big Brazilianpublishers are avoiding exporting to them. That is why agreat part of the Brazilian ebooks available at the Amazonlocal store, for instance, is not available for American andEuropean customers. Exports will require significant additionaltax control and paperwork, so the publishers havedeclined to take further risks for the small revenues thatthey can expect.eGovernmentIf tax issues were not a good enough reason for digitalpublishing and bookselling executives to visit Brazil regularly,the power of federal government book purchasing is.As we saw above, the public sector generated over 26.4%of publishers’ revenue in 2012, and the truth is that theebook revolution will only get major traction in Brazil whenthe government decides to go digital. However, that mayhappen faster and more easily than many may anticipate.First, one must remember that the Brazilian governmentis strongly emphasizing its digital agenda. Elections aredigitally controlled nationwide, and winners are announceda few hours after any ballot. The Brazilian Internal62 The Global eBook Report