British Consumers to Face iTunes Price Hike After New Taxation Rules

[RaduTyrsina]

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It seems that the days of £0.99 music downloads at Apple’s U.K. iTunes Store may be coming to an end as Britain’s Government is looking to close a tax loophole which allows companies to charge Value Added Tax rates from other countries. Thus, Apple and other companies who deal with digital music sales, could be forced to increase the amount of VAT for music and video sales. Rowena Mason from The Guardian publication has more details about this:

The chancellor will bring in new laws making sure that internet downloads are taxed in the country where they are purchased, meaning web firms such as Amazon and Apple will have to charge the UK’s 20% rate of VAT. At the moment they are allowed to sell digital downloads through countries such as Luxembourg, where the tax rate is as low as 3%. In a little-noticed announcement, Osborne said he would used this year’s finance bill to impose the new law from 1 January 2015

Apple has been selling its iTunes downloads through EU countries like Luxembourg with VAT rates as low as 3 percent. The new law could be effective from 1 January 2015 and Apple would have to align with U.K.’s full 20 percent VAT for purchases. Here’s what the budget document says:

As announced at budget 2013, the government will legislate to change the rules for the taxation of intra-EU business to consumer supplies of telecommunications, broadcasting and e-services. From 1 January 2015 these services will be taxed in the member state in which the consumer is located, ensuring these are taxed fairly and helping to protect revenue

Closing the VAT loophole for Apple and other companies selling digital content will definitely help get more money coming into the government, but in the end, consumers are those who won’t be too happy about this. The change is estimated to raise government income from taxes on digital sales by as much as £300 million ($494 million) per year year.


Source: iPhoneForums

 

[s2mikey]

Great, more money siphoned from citizens to their respective Govts. That can only a be a *good* thing, right?

Only big companies are allowed to get out of paying taxes, I guess.

 

[Pinkpoison]

Our government would tax the very air we breath if they could find a way.

 

[skimonkey]

I read conflicting reports where after tax the users in in the UK would actually pay less. So I am confused. Maybe I read it wrong, but it came out after the story on tax increase.

 

[Ser Aphim]

Ok now I have more reasons to hate iTunes...........

 

[Pinkpoison]

This just reinforces my thoughts that its better to buy the music you want on a cd and rip it to your computer, That way you always have a physical copy and it helps the struggling music shops.

 

[twerppoet]

Updated by most news orgs.

Apple actually sells through it Ireland subsidiary where the VAT is 23%, so the tax will go down (to 20%) not up. Since this won't change much, less than 3 pence, Apple is unlikely to actually lower prices. But at least it won't be going up.


79 x 23% = 18.17
79 x 20% = 15.8

2.37 difference.

 

[twerppoet]

Ok now I have more reasons to hate iTunes...........

Because the government is enforcing local VAT? Best start hating every other online retailer too, since the new law is aimed at all of them. Besides, as noted, it's actually going to reduce the VAT for iTunes, though not enough for Apple to feel any pressure to pass it along. Retailers have this thing about ending all prices in 9's, and the difference won't be enough to make that happen.

 

[Ser Aphim]

Because the government is enforcing local VAT? Best start hating every other online retailer too, since the new law is aimed at all of them. Besides, as noted, it's actually going to reduce the VAT for iTunes, though not enough for Apple to feel any pressure to pass it along. Retailers have this thing about ending all prices in 9's, and the difference won't be enough to make that happen.

Oh! Thanks for the info.

 

[ardchoille]

Retailers have this thing about ending all prices in 9's, and the difference won't be enough to make that happen.

Fun fact:
That is known as psychological pricing. Most people associate spending $1.99 with spending $1 rather than $2.

 

[Pinkpoison]

Fun fact:
That is known as psychological pricing. Most people associate spending $1.99 with spending $1 rather than $2.

This is so true, I don't fall for it though, If something is £1.99 for example i round it up to £2 in my head, 1p is neither here nor there,.

 

[s2mikey]

This is so true, I don't fall for it though, If something is £1.99 for example i round it up to £2 in my head, 1p is neither here nor there,.

Actually, it's more like rounding up to 3.00 since the TAX takes it over 2.00.