Print 15 comment(s) - last by Reclaimer77.. on Mar 25 at 8:39 PM

Apple, amazon, and other digital item retailers will have to charge 20% VAT starting in 2015

A long-standing tax loophole has been available in the UK that allowed buyers of digital download products to pay fewer taxes on their purchases of digital books, music, and apps.
That loophole has now been closed and it will mean that Apple and Google now have to charge the standard 20% VAT. This likely means an end to music being offered at 99p.
Apple and other digital good sellers were allowed to funnel digital purchases though countries like Luxembourg where the tax rate was as low as 3%.

20% VAT on digital downloads could add £300 million in tax revenue

The new law will go into effect on January 1 2015, so fans of digital products in the UK have a bit less than a year before rates go up significantly. The new taxes are expected to raise an additional £300 million in tax revenue.
Both Apple and Google have come under fire in recent years for their tax avoidance practices in the UK. Google executive chairman Eric Schmidt defended his company in April 2013, stating, “I think the most important thing to say about our taxes is that we fully comply with the law and we'll obviously, should the law change, we'll comply with that as well." 

Source: The Guardian

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By Motoman on 3/24/2014 9:40:58 AM , Rating: 5
“I think the most important thing to say about our taxes is that we fully comply with the law and we'll obviously, should the law change, we'll comply with that as well."

This is what I've said all along...all these major corporations are acting completely legally when they use various loopholes to avoid paying taxes. And all corporations do it...because it's a requirement to do so, as part of their duty to their shareholders. It's not like they have a choice.

The solution has always been to not scream at the corporations for behaving legally - it's been to fix the laws.

So there you go. One law fixed.

RE: Yup
By invidious on 3/24/2014 10:19:41 AM , Rating: 2
Unfortunately in many cases the laws are broken on purpose by politicians looking to help their constituants. The root of the problem is greed and a lack of free market oversight.

Government regulation of the market definately has its place, but there should be more free market feedback in the regulatory process. Otherwise you end up in situations where lobbying is more cost effective than innovating, and the only people who benifit from that are the politicians.

RE: Yup
By Solandri on 3/24/2014 3:59:43 PM , Rating: 2
Unfortunately in many cases the laws are broken on purpose by politicians looking to help their constituants. The root of the problem is greed and a lack of free market oversight.

You're thinking about the problem backwards.

The natural state of affairs is for there to be no taxes. So the root of the problem is always improperly worded or implemented tax laws. Certainly, that improper wording or implementation could be the result of greed or insufficient regulatory oversight, but there's no justification to automatically assume those are the causes.

Once you realize non-taxation is natural, then you realize loopholes are merely areas the tax law does not (yet) cover. You're trying to cover an infinite number of possible situations with a finite number of laws. Of course there will be loopholes, regardless of whether anyone intentionally or unintentionally made them. The best you can realistically hope for is that the vast majority of common situations are covered, and the law quickly amended to patch up any new ones discovered. You're basically playing whack-a-mole.

It's only when you mistakenly assume that taxation is the normal state of affairs, that you erroneously think tax law can be written to cover all cases; and that any loopholes must therefore have been inserted by malicious intent or incompetence. Zero taxation is the only absolute fixed frame of reference. (Please note: I'm not saying zero taxation is the best state of affairs. I'm merely pointing out why any taxation will always be imperfect.)

RE: Yup
By RedemptionAD on 3/24/2014 10:25:27 AM , Rating: 2
They are complaining for others to fix something that only they, themselves, can fix. The real issue is was the loophole intentional? An honest mistake? An unforeseen global situational change that created it? Or perhaps a combination of reasons.
Government's backyard has been filled with trash like this loophole for years that no one in government has seemed to want to pick up and the government themselves says that no one else has the authority to do so, so the problems get worse and the people suffer the consequences.

RE: Yup
By Motoman on 3/24/2014 10:37:16 AM , Rating: 2
Oh, all the loopholes are intentional - an effect of political parties and lobbying.

Good luck getting rid of those though.

RE: Yup
By drycrust3 on 3/24/2014 12:04:37 PM , Rating: 2
They are complaining for others to fix something that only they, themselves, can fix. The real issue is was the loophole intentional?

No, the real issue is does the loophole exist, and it does, therefore, as the original poster says, the Board of Directors have an obligation to do what is best for their shareholders. Obviously breaking the law isn't what is best because the corporation will be heavily fined for doing so, but doing things that are legal, don't cost a lot and save a huge amount in taxes is, therefore they have to exploit loopholes. How the loophole got there is immaterial.
The interesting thing here is what is the leverage that the British taxation department has that "encourages" these corporations to gather the taxes? A normal British business owner, if they refuse to collect taxes, knows they can have assets seized and could end up in jail if they do refuse, so they have little choice but to follow the law. So what is the leverage the British Crown uses for these corporations? The only thing I can think of is some British department has the authority to ban British ISPs from sending traffic to certain IP addresses, so if Google, Apple, Amazon, etc, don't collect the taxes then they could find their IP addresses banned and not get much business from the UK.

RE: Yup
By hughlle on 3/24/2014 3:31:40 PM , Rating: 2
The end user pays for this, not the company, so no oubt they don't have that much of an issue agreeing to this. I'm sure that they also have no issue agreeing to this so long as they're based in Ireland etc and get to pay a fraction of the corporation tax they would have to should those loopholes be closed.

RE: Yup
By futrtrubl on 3/25/2014 12:43:03 AM , Rating: 2
They would have an issue with it as they would have to either decrease their margin (loose profit, ouch) or raise prices to consumers which would make them loose customers as they would be less competitive than before compared to domestic companies that have already been paying.

RE: Yup
By Reclaimer77 on 3/25/14, Rating: 0
Who really looses on this?
By GotThumbs on 3/24/2014 12:17:59 PM , Rating: 2
It's NOT the companies and its not the Tax revenuers.

It's the consumers who buy these products.

They will all have less money to spend, so they will buy less products over all or find alternative means. Why buy music when you can get it free over the radio each day or stream via the web or Apps.

I dumped cable over 3 years ago, because I can get free HDTV over the air and stream any other content I need from the web. I've saved over $2,600 at least, because of this choice and it's been a very easy transition. Nothing on Tv, then I just stream from HULU (free, no subscription),Netflix or get out of the house to experience the real world.

When more and more consumers realize there are other options/choices, thats when things will change and people can keep more of their money IMO.

~Best wishes keeping what you earned.

RE: Who really looses on this?
By Dorkyman on 3/24/2014 2:43:56 PM , Rating: 2

I don't know why people expect "corporations" to not be "greedy." Their job is to make a profit for their shareholders. If you want their product, buy it, otherwise don't.

Three years ago we dropped our regular telephone service ($80/mo) and set up Ooma VOIP ($10/mo). More recently we dropped Sprint ($180/mo) and picked up Ting ($100/mo). That's the beauty of competition inherent in capitalism.

RE: Who really looses on this?
By marvdmartian on 3/25/2014 7:28:19 AM , Rating: 2
Absolutely. The government there is looking at the sales today, and saying they'll make so much in taxes, based off those sales. When, what's more likely to happen, is that they'll gain some revenue, but not nearly what they expect.

Why? Because people now have 20% LESS to spend. Duh. But hey, the tax man will still be surprised, won't he?

I think the Beatles got it right, long ago.

Ripped off
By saarek on 3/24/2014 12:37:11 PM , Rating: 1
Considering that we already pay far more that US Consumer for our music on iTunes etc I see no reason as to why the UK consumer should have to pay more.

The greedy corporations simply need to charge us the same as the US Citizens. That way we would pay less than we do now even with the VAT!

RE: Ripped off
By Scannall on 3/24/2014 1:30:22 PM , Rating: 2
Apple makes very little net revenue from iTunes and the app store. Should they take a loss on each sale?

Of course that cost will be passed on to you. All taxes paid by all companies are passed on to you.

RE: Ripped off
By w8gaming on 3/24/2014 6:29:39 PM , Rating: 2
VAT is always passed along to the consumers. The corporations such as Apple is just a collector of the tax and pass it to UK government. They will not make any loss. The question is whether they can lower the price of sales (before tax) so that they are priced as the same?

"This is about the Internet.  Everything on the Internet is encrypted. This is not a BlackBerry-only issue. If they can't deal with the Internet, they should shut it off." -- RIM co-CEO Michael Lazaridis

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