UK Closes Tax Loophole On Digital Downloads, Prices Could Soar 20 Percent
March 24, 2014 9:24 AM
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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."
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RE: Ripped off
3/24/2014 1:30:22 PM
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
3/24/2014 6:29:39 PM
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?
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