App Store and iTunes Prices in UK May Increase Up to 20%

[OllyW]

Moderator Note

The off-topic Scottish Independence discussion has been moved to it's own thread in the PRSI forum.

 

[madeirabhoy]

I think you are confusing the threshold at which VAT must be collected, and my point, which is that the VAT is a tax on purchases, not earnings. VAT is collected by a vendor on behalf of the government for all sales, but has no relation to the vendor's earnings. It is a direct tax on the consumer based on the price of the good/service purchased by the consumer. Therefore, if Apple previously did not have to collect the tax for certain downloads, that benefit is received by the purchaser, not Apple. Said another way, VAT is a tax on consumers, not businesses. Consumers are the beneficiaries of this tax avoidance scheme, if we want to call it that, not Apple. At least, that is how I would characterize this situation.

not necessarily though.

firstly its not like apple has added up its costs and thought lets add a set percentage for profit, and then the tax and see what price we come up with.

apple has chosen a price that they feel is competitive with the market and will sell well. would they have chosen a cheaper price if a different EU country allowed them to launder the cash for less than 3% (for that is all luxemburg is doing), no i would think it was unlikely. if they were unable to do this, would they have jumped in with 1.20, maybe not. probably they'd still have gone with 99p im sure now they will wack the price up as they can say its not their doing.

secondly, the consumer is comparing and buying apples product whilst comparing it to other companies who are actually paying the uk VAT and is assuming apple is too. the consumer is therefore getting ripped off as they thik 20% of their spend is coming back to their government to pay for services, but actually none of it is and 3% is going to luxembourg who are neither the place where the item was made nor is it where the goods are bought from.


and companies charging the tax of the country of purchase is nothing new. i live in portugal. i buy items from amazon uk. amazon charge the correct VAT for portugal, not for the uk, or for louxemburg.

i can see this when i buy food stuffs, the original page shows the vat for the uk, which on most food stuffs is zero, so when i put my address as portugal, it changes to reflect the vat. for a lot of items this makes sense as its still cheaper then buying here.

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I'm pretty sure Apple didn't profit from using this loophole, consumers did. The only way they would have profited is if more people bought an app because it was cheaper, which doesn't seem like a bad thing. Apple (and other companies) were using this loophole to keep prices for consumers down!

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Apple was not the one profiting from this, consumers were! You paid less for downloads before because you were paying less tax. If you support the tax, you should support paying the tax.

you honestly dont think apple profited from this loophole and they did it for the good of their customer? whit????

apple did this to make more money. less taxes means more money. whether a higher tax would have meant selling less goods at the same profit or the same goods at less profit, it would have cost them profit.

 

[fixmymac]

I doubt the double Irish w/Dutch sandwich is the intents of the tax code, to put it mildly.

There is a difference between "more than legally required" and "exploiting loopholes" - Apple's strategy (and various other international corporations, Apple is by no means singled out here) is definitely covered by the latter. And fixing those loopholes is a big priority right now...

This is exactly the case! It is an accountant's job to find and exploit loopholes. It is, or should be, the duty of government to make sure there are NO loopholes to exploit.

 

[hsotnicam8002]

Many of the posts here seem to be getting a bit too emotional.

If we bring in the facts:

1. This has nothing to do with Apple minimising its global tax costs. This is purely to do with the UK charging a tax on the place of consumption, versus the place of purchase.

2. The EU has nothing to do with this. There are EU rules regarding VAT, but they stipulate that EU countries should impose a minimum of 15% VAT. And that's it.

So this is all a bit of a mountain out of a mole hill.

And for all the 'UK/EU are socialist countries' contributors, might I suggest you take a moment to add up the costs of your healthcare premiums and add them on to your tax costs. In the UK, healthcare premiums are part of UK tax costs.

Except for prescription charges, dental charges and sight and glasses/contacts charges, wigs and supports charges, and extortionate hospital profit-making car parking charges. In the UK we have been, and still are, taxed to the hilt. We even pay some service taxes after income tax. If you like paying your taxes without complaint, then fine. I prefer to petition to have them lower. I am not allied to any political movement, I just look at policies and criticise them if they need it (which they usually do). It's a pity that politicians do not stick to the policies that they push come election time, though I appreciate they package them to be as ephemeral as possible. Politician = liar, cheat and deceiver. And that's just the UK. I haven't the time to comment on the Europolitians. Suffice to say, add even more of the lying, cheating and deceiving with a lot more incompetence thrown in. I propose a halving of all income, local and value added taxes but that yours are doubled to pay for my cuts!

 

[barberio]

Good lord lots and lots of verbiage and ranting here, all based on an article that got it entirely the wrong way around.

Currently VAT is charged at the seller's tax residence.

So Apple, tax resident in Ireland (not Luxembourg at all!) charges UK customers 23% VAT.

After the EU wide change to VAT, VAT will be charged at the buyer's tax residence.

So Apple will now charge UK customers the UK's 20% VAT.

23% is not 20% larger than 20%. Apple will actually be paying 3% less tax on UK sales... I think Apple are going to be entirely happy with absorbing this change of tax.

What a stupid article, and to be frank what a bunch of hot air in the above replies. Retraction printed soon I hope.

 

[Sy7ygy]

Don't let the door hit your behind on the way out will you

No, I'll be leaving it open to enjoy watching the country rot along with a lot of the delusional lot that live here.

 

[elthesensai]

I think i am split over-this decision:

on one side, i feel that tax avoidance by companies like apple, amazon and starbucks is diabolical, given that the customer originated from the uk - a deontological virtue, to pay taxes in a righteous manner



on the other side, this means all my apps will cost me more

I know what you mean. They also avoid American taxes and as an American company that seems like a double whammy the only thing I don't agree with you is in the fact that we should pay more money because Apple has to pay more taxes. They're a very rich company and can afford the taxes. It's how doing business works. Do you get an increase in wages when your country raises taxes? I assume it's based on merits.

 

[madeirabhoy]

Good lord lots and lots of verbiage and ranting here, all based on an article that got it entirely the wrong way around.

Currently VAT is charged at the seller's tax residence.

So Apple, tax resident in Ireland (not Luxembourg at all!) charges UK customers 23% VAT.

After the EU wide change to VAT, VAT will be charged at the buyer's tax residence.

So Apple will now charge UK customers the UK's 20% VAT.

23% is not 20% larger than 20%. Apple will actually be paying 3% less tax on UK sales... I think Apple are going to be entirely happy with absorbing this change of tax.

What a stupid article, and to be frank what a bunch of hot air in the above replies. Retraction printed soon I hope.

um. no. at the moment itunes purchases are from itunes sarl in luxembourg.
the article is completely correct. ive just checked my last receipt from purchase. the only reason apple use itunes sarl to process a purchase from an american company to me in portugal, is to process the money with a lower vat than they would do through apple portugal.

in case you are thinking that itunes sarl is a big apple company with huge offices and staff all processing itunes transactions and dealing with queries, itunes sarl is a post box.

http://treasureislands.org/this-is-what-apple-itunes-europe-looks-like/



and (it wont let me cut and paste) in this link there is actually a quote from the ex head of apple's itunes sales and marketing for europe saying specifically "we set up in luxembourg because of its favourable taxes".



http://www.examiner.com/article/how-apple-sets-the-bar-high-for-tax-avoidance-as-well-as-for-tech

 

[johnnyturbouk]

Actually, isn't it the UK citizen that avoided paying the tax? It's a tax on what the individual purchases, collected by the company for the benefit of the UK government. It has nothing to do with Apple's earnings.

I really think you are missing the point here. I fail too see how your response makes sense:

isn't it the UK citizen that avoided paying the tax?

NO! well, maybe, indirectly.

Firstly, it was my belief that the companies were using an EU loop-hole whereby they paid tax to Luxembourg (for e.g.) not the UK, for products purchased in the UK - and the customer is not actively ordaining to pay the Luxembourg tax, c.f uk VAT.

Secondly, you could be a non-UK citizen ordering a product being delivered to the UK, however the TAX paid would be going to Luxembourg, for e.g.; i believe it was this loop-hole the current government wants to close.

eg an app sells for £1.49 here in the UK. The dev will get ninety-one pence from Apple for each sale.

If we take that £0.91 and add back the 30% that Apple take we get £1.30. Then we add VAT, which in the UK is 20%, and we get… £1.56.

It turns out that downloads are billed from Luxembourg where the sales tax rate is 15%. Because both countries are in the EU there’s a reciprocal tax agreement which means we don’t have to add UK tax as well.

If we do the same calculation as before but with a 15% tax rate we get… £1.49.

reference


So the UK citizens are not actively choosing to avoid UK VAT, however, one could say ethically, we could only source goods from companies that pay VAT to the UK, for products delivered to the UK - an unlikely scenario.

 

[barberio]

um. no. at the moment itunes purchases are from itunes sarl in luxembourg.

Fair enough, Apple's page is misleading then.

the article is completely correct.

Except that "Prices may increase up to 20%" is still pretty blatantly wrong use of percentages. Prices won't go up by 20%.

And realistically, prices are likely to stick to .99 ended selling points. Prices on consumer goods very rarely change except to the next selling bracket, not on variation with every change in taxation, or supply costs or with gradual inflation changes. Consumer pricing is not volatile, unlike trading commodities, the price stickers don't get changed day to day. There are indeed strong forces that'll maintain pricing inertia, a £1.99 app is going to be a lot more attractive than a £2.39 app. It'll take till inflation pushes it all up to £2.99 that a lot of apps will change.

 

[madeirabhoy]

Fair enough, Apple's page is misleading then.



Except that "Prices may increase up to 20%" is still pretty blatantly wrong use of percentages. Prices won't go up by 20%.

And realistically, prices are likely to stick to .99 ended selling points. Prices on consumer goods very rarely change except to the next selling bracket, not on variation with every change in taxation, or supply costs or with gradual inflation changes. Consumer pricing is not volatile, unlike trading commodities, the price stickers don't get changed day to day. There are indeed strong forces that'll maintain pricing inertia, a £1.99 app is going to be a lot more attractive than a £2.39 app. It'll take till inflation pushes it all up to £2.99 that a lot of apps will change.

the 2nd bit i agree with, its possible that apple will have to absorb a lot of the tax because they've chosen their prices as you say as good selling points. i can see them sticking the prices up to start with to make a point and then quietly reducing them.

 

[NoBaaad]

Sorry for UK. Always using free app, anybody else?

 

[s2mikey]

Except for prescription charges, dental charges and sight and glasses/contacts charges, wigs and supports charges, and extortionate hospital profit-making car parking charges. In the UK we have been, and still are, taxed to the hilt. We even pay some service taxes after income tax. If you like paying your taxes without complaint, then fine. I prefer to petition to have them lower. I am not allied to any political movement, I just look at policies and criticise them if they need it (which they usually do). It's a pity that politicians do not stick to the policies that they push come election time, though I appreciate they package them to be as ephemeral as possible. Politician = liar, cheat and deceiver. And that's just the UK. I haven't the time to comment on the Europolitians. Suffice to say, add even more of the lying, cheating and deceiving with a lot more incompetence thrown in. I propose a halving of all income, local and value added taxes but that yours are doubled to pay for my cuts!

Well said. All of the do gooders and bleeding hearts that love handing their entire paycheck over for the betterment of mankind can always get another job and send in MORE money to "help". Leave the rest of us alone though. Thanks.

 

[Luke Redpath]

Fair enough, Apple's page is misleading

No it's not at all.

The Apple online store is operated out of Ireland so any digital goods bought through that will be charged 23% VAT. This will indeed drop to 20% UK VAT from Jan.

The iTunes, iBooks, Mac and iOS App stores are all operated by iTunes SARL based in Luxembourg where the VAT rate is currently 15% (3% for ebooks) and this will of course increase to 20%, resulting in about a 4% increase in the gross price if Apple do not absorb the costs.

Apparently the Lux VAT rate is due to go up to 17% in Jan so prices may well have gone up anyway. Ebook prices will be hit the most and this will also significantly affect Amazon.