Online bookseller Amazon has been accused of working the UK tax system and charging publishers 20 percent VAT on digital books while actually paying only three percent.

According to The Inquirer, an investigation by the Guardian newspaper has unearthed a contract that says that Amazon starts negotiations with publishers with the requirement that 20 percent is knocked off the cost to make up for UK VAT.

The Guardian says that this is despite the fact that Amazon is based in Luxembourg, and as a result, will only pay three per cent VAT. This means that it will pay publishers not very much for their content, while charging what it wants and making a decent whack of cash.

Amazon didn't deny the accusations, but did sort of defend itself while ignoring the issue. "Our goal is to make it easy for readers to discover and read the books they love by expanding access to millions of books in both digital and print. We've been able to do this by focusing on innovation, as exemplified by Kindle, and by offering customers the widest selection at the best possible prices and service," it said in a statement.

"This innovation and service have not only benefited readers, but authors, too - as just one example, Kindle Direct Publishing, our self-publishing platform, has fundamentally transformed global distribution and royalties for authors in the UK."