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

[garya73]

Quite right too! If you're going to have VAT (I'm unsure about the morality of VAT - seems a bit regressive to me, why don't we get rid of VAT most other taxes and just have higher income taxes?) it shouldn't matter where the product is being sold from.

VAT is actually a superior tax system to income tax. It treats everyone equally and makes the tax code incredibly simple.

It just seems so high because it is all taken at once. Here in the US we have multiple deductions from our paychecks - federal tax, medicare tax, social security tax, state tax and sales tax. Not all states have sales tax, but most do, and not all states have state income tax.

There is also taxes on renting hotel rooms. And I am sure countless others that people on this board could name.

You also pay much higher taxes when you make more money. Taxes on corporate gains, from selling a house...

Then they deduct health care expenses from your paycheck (not applicable to all jobs and all situations).

Have to cash out your retirement fund early? You get socked with a huge tax bill. Win something over $600? Taxed.

Too many loopholes for corporations to avoid paying tax or paying very little tax.

Gasoline tax.
Cigarette taxes.
Alcohol taxes.

Everything unnecessarily contributes to a complicated tax system. Then you get the politicians involved, and it all goes to hell. The state I live in is trying to add 10 cents to the gasoline tax. We already pay 23 cents per gallon and have tolling facilities on the interstate and a state highway. They also want to put tolling on a proposed bypass highway.

Get rid of income tax, go to VAT, and eliminate the IRS and tax returns.

 

[VoR]

Why does closing a tax loophole make the UK a joke?

Maybe it'll end up as another laughable attempt at increasing tax revenue, like with LVCR.
The people that work round the ridiculously complicated laws are a lot better at it than the people that dream it up. Companies focus on business, government concentrate on their sales pitch and ignorant masses continue to get screwed.

 

[ArcaneDevice]

VAT is actually a superior tax system to income tax. It treats everyone equally and makes the tax code incredibly simple.

The UK has both systems so your point is moot.

And VAT doesn't treat everyone equally. Those that can afford a fleet of Aston's in their multiple homes don't care what the VAT on milk, food, fuel etc. is. The rest of the population does.

That's like saying taxing only cancer medicines treats everyone equally. It only sucks if you are ill (that's your fault for getting sick), but hey if you aren't then it's no big deal, so the system works.

Not to mention when people stop buying goods are you going to increase tax to offset the losses to keep essential services running or are you going to just cut those services?

 

[bsolar]

You can still go bankrupt even if you have health insurance. You don't expect the pesky insurance companies to pay for it all do you? They are experts at finding reasons to not pay.

I work in the insurance industry. In my experience, I would actually expect an health insurance company to pay more often when not strictly required than the opposite. Health insurance is a field requiring a lot of tact: refusing to pay a claim unless blatantly not due would be a huge reputation damage which in a competitive market means losing a lot of customers very quickly.

All the insurance companies I know tend to pay claims very liberally and try to reduce costs incentivizing healthy lifestyle, frequent health checks (which the insurance subsidizes recouping the money in finding problems sooner when the cure costs typically a lot less) and disincentivizing bad habits.

 

[prowlmedia]

Apple should simply ****ing absorb the VAT. It's not as if they did not already profit enough from those tax leaks and make quite some money anyway.

You wanna make money in a certain country? Pay this country's taxes.
Just ridiculous to pay taxes in Luxembourg or Ireland but sell goods and services in a completely different country?

Ford should absorb road tax. Rolls eyes.

 

[solipsism]

They were required by law to pay more, they dodged it using loopholes. How would you like it if you ran a small company and paid all your taxes, but Amazon paid next to none in your country despite trading there? Same thing.

If they used a loophole they therefore were not required to pay more.

 

[prowlmedia]

The UK is such a joke.

Says Redneck1089. Hilarious.

 

[CJM]

The UK is such a joke.

Lol America. How's that health service coming along?

 

[bsolar]

And VAT doesn't treat everyone equally. Those that can afford a fleet of Aston's in their multiple homes don't care what the VAT on milk, food, fuel etc. is. The rest of the population does.

A typical strategy is to tax these products with a different, lower VAT. E.g. according to Wikipedia in the UK the VAT for "life necessities – basic food, water, prescription medications, medical equipment and medical supply, public transport, children's clothing, books and periodicals" is 0%. I guess it should include ebooks?

 

[solipsism]

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...

There isn't and silly for anyone to suggests should be impretted for their intent or that using an accidentally (or as oft the case, explicity placed) loophole is breaking the law.

 

[ArcaneDevice]

I work in the insurance industry. In my experience, I would actually expect an health insurance company to pay more often when not strictly required than the opposite. Health insurance is a field requiring a lot of tact: refusing to pay a claim unless blatantly not due would be a huge reputation damage which in a competitive market means losing a lot of customers very quickly.

Unless of course you are allowed to based on a pre-existing condition. If the insurance companies had not managed to twist that ruling for decades to allow them to deny claims, then it wouldn't have needed a new law to prevent it.

Not to mention that until recently competition was never a factor since the majority get their insurance through an employer and never have a choice. So evidence of denials (which are many and frequent) has almost no effect on customer base.

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A typical strategy is to tax these products with a different, lower VAT. E.g. according to Wikipedia in the UK the VAT for "life necessities – basic food, water, prescription medications, medical equipment and medical supply, public transport, children's clothing, books and periodicals" is 0%. I guess it should include ebooks?

Which not only complicates the situation still but again bases a good chunk of your basic services on the spending whims of your citizens.

So if your citizens get more frugal and start saving money by stopping buying all those higher tier services then you are once again faced with the choice of cutting back or increasing taxes.

Which is why the UK doesn't rely on it to solely power it's infrastructure.

 

[andyjam]

Ok, let's play this game. App is £10. Currently, developer gets £7 and Apple £3. Under 1-Jan-2015 laws, and your proposal, Apple should, from their £3 profit, pay the £2 tax. Ok, the still make £1. What, then, stops the government from stating the VAT is 40% starting 1-Jan-2016. Should Apple then absorb that loss, too? So charge the customer £10, pay the developer £7, pay the government £4 and write off that £1 loss. Yeah, great idea.

This is going to come to the states soon enough. It is part of the problem that needs to be addressed because the laws have not kept up with the times.

You have grossly misunderstood how VAT works. A company doesn't pay it, we do as the consumer.

If an app costs $1.20, then $0.20 automatically goes straight to the government. This isn't Apple's money at any point in the transaction, they simply pay it on. The remaining $1 is the money that gets split between Apple and the developer.

 

[Boghog]

I'm surprised how many people think this will affect the prices customers pay in the app store. The price of any commodity is always as high as the seller can get away with. Why would he sell for less than customers are willing to pay. There is always a sweet spot where the price generates the optimum profit. This point does not depend on production costs.
This means that he can't just hike up prices when overhead costs rise because customers would buy less. If the Apple/developer team have to pay more taxes, the developer will have to suck up most of it (70% to be exact), Apple will suck up the rest - they don't set the price anyway. If that means that the developer can't generate enough profits, he will go out of business. Raising prices is not a solution as it reduces revenue.

 

[elppa]

Apple should simply ****ing absorb the VAT. It's not as if they did not already profit enough from those tax leaks and make quite some money anyway.

You wanna make money in a certain country? Pay this country's taxes.
Just ridiculous to pay taxes in Luxembourg or Ireland but sell goods and services in a completely different country?

Apple can only absorb tax if they do it elsewhere. I don't think it is fair to pick and choose countries.

 

[Akuratyde]

Don't feel bad, UK. Many here in the US know your pain. I live in New York State, which a while back instituted the "Amazon tax", making us one of the few states that actually taxes Amazon purchases. New York - the state that never met a tax it didn't love.

Same here in California.

 

[iolinux333]

I'm surprised how many people think this will affect the prices customers pay in the app store. The price of any commodity is always as high as the seller can get away with. Why would he sell for less than customers are willing to pay. There is always a sweet spot where the price generates the optimum profit. This point does not depend on production costs.
This means that he can't just hike up prices when overhead costs rise because customers would buy less. If the Apple/developer team have to pay more taxes, the developer will have to suck up most of it (70% to be exact), Apple will suck up the rest - they don't set the price anyway. If that means that the developer can't generate enough profits, he will go out of business. Raising prices is not a solution as it reduces revenue.

Your words of wisdom are lost on 90% of the populace who have no ability to reason and instead act on emotion - it's not their fault it's just the reality of human genetics.

 

[penplotter]

Your words of wisdom are lost on 90% of the populace who have no ability to reason and instead act on emotion - it's not their fault it's just the reality of human genetics.

Genetics? Hardly. It's called having a soul and a spirit; nothing to do with genes at all.

 

[springsup]

It would be absolutely bunkers if that happened. I agree with you that surely Apple should never do that.

Another way they could do this is to pay 70% of the ex-VAT sum. This essentially means that if the digital content were £1, and:

1. VAT is 5%, the app writer gets 66.67p, Apple gets 28.57p, and the government get 4.76p.

2. VAT is 20%, the app writer gets 58.33p, Apple gets 25p, and the government gets 16.67p.

3. Even in bizzaro world where VAT is 40%, the app writer gets 50p, Apple gets 21.43p, and the government gets 28.57p.

It's worth noting that quite strangely, items selling for $1 on the US Apple Store cost 69p, in the UK Apple Store, which about $1.15, which already is a 15% 'charge' above US prices.

That is how it works right now. The 70/30 split happens after VAT is paid. Developers don't get 70% of the VAT-inclusive price.

All in all, this is a very good change. As the article clearly states, Apple already charge 15% VAT on App purchases at least, so the increased tax burden is only 5%.

That's not the positive change, though. The positive change is that VAT revenue from British people buying products on iTunes will now go to the British government, not the government of Luxembourg. It is totally absurd that anything else should happen.

 

[bsolar]

Unless of course you are allowed to based on a pre-existing condition. If the insurance companies had not managed to twist that ruling for decades to allow them to deny claims, then it wouldn't have needed a new law to prevent it.

Not to mention that until recently competition was never a factor since the majority get their insurance through an employer and never have a choice. So evidence of denials (which are many and frequent) has almost no effect on customer base.

The pre-existing condition rules are typically not to avoid denying claims but to allow "bad" customers to actually get an insurance in the first place. Insurance companies would obviously refuse to insure people with a too high risk, or would do that only with a very high risk premium, which might be unaffordable. The problem is in general when private companies are expected to provide a public service: the public service is typically supposed to be available to everyone but it could be financially counterproductive to provide it to some customers. Regulation in these cases will be always required to guarantee fair service availability to everyone.

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Which not only complicates the situation still but again bases a good chunk of your basic services on the spending whims of your citizens.

So if your citizens get more frugal and start saving money by stopping buying all those higher tier services then you are once again faced with the choice of cutting back or increasing taxes.

Which is why the UK doesn't rely on it to solely power it's infrastructure.

If citizens get more frugal it typically means they have less money, which typically means they have less taxable income. Basically if the economy is in trouble you'll get less tax money no matter which way you get it.

 

[rdlink]

I suspect we would riot in the streets if they increased tax to 40% and I am NOT joking on that. We would literally have a civil uprising. So that is what is stopping them.
And I agree, Apple should absorb the increase, they have made enough billions by dodging the UK taxes they had a duty to pay by exploiting loopholes. They are not the only ones either.

Pretty moronic statement. These taxes were never Apple's responsibility. VAT taxes are always paid by the consumer. Apple hasn't avoided any taxes. They've allowed their UK customers to avoid a regressive and unfair tax by playing a game with an oppressive and overtaxing government entity. More power to them.

And you wouldn't riot in the streets. You would absorb the incremental increases quietly, like every other sheep who thinks that government taxation is for the greater good, instead of a case of the pig continuing to come to the trough. You'll get what you deserve.

 

[the8thark]

No, the US healthcare system is a joke. Things like the VAT support the NHS.

Quoted for truth.

 

[JGowan]

Apple should simply ****ing absorb the VAT. It's not as if they did not already profit enough from those tax leaks and make quite some money anyway.

You wanna make money in a certain country? Pay this country's taxes.
Just ridiculous to pay taxes in Luxembourg or Ireland but sell goods and services in a completely different country?

Mmmm... If there's not a law against a company "absorbing" or paying a customer tax, there would be one almost immediately. Talk about UNFAIR business practices. Can you imagine the outcry from OTHER BUSINESSES. Sure, customers would like but those customers in competition would scream Holy Hell. I don't think you thought this through (and neither did the 35 people thumbed-up you.)

 

[DavidG328]

Apple should simply ****ing absorb the VAT. It's not as if they did not already profit enough from those tax leaks and make quite some money anyway.

You wanna make money in a certain country? Pay this country's taxes.
Just ridiculous to pay taxes in Luxembourg or Ireland but sell goods and services in a completely different country?

Is there a place to nominate posts for the worst of all time?

 

[Sabenth]

Bah stop moaning no ones forcing you too buy digital goods. At the end of the day of you want something it's up to you the buyer if you want something from an online store. Playstation xbox spotify etc

 

[bigchrisfgb]

Lmao, that blows. You hear them complaining about the cost of Macs already, and now this on top. It's getting reallyyyy expensive to be a nerd nowadays

Things like Mac's etc all incur a VAT charge already, (Apple still gets around paying the majority of this because of it's operations in Ireland, however the VAT is still charged to the consumer). This will also apply for all digital music, meaning all purchases will now incur VAT, so even those other than iTunes (Like Google's Play store) will all incur VAT charges and a higher price. Interestingly it will also mean the same for Lovefilm and Netflix. A Netflix account would increase from £5.99 to £7.19 (assuming they round the price up) with a 20% increase for VAT.

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No, the US healthcare system is a joke. Things like the VAT support the NHS.

No it doesn't. NIS (National insurance) supports the NHS. NIS is paid for by everyone who is employed or in receipt of benefits (so basically everyone over the age of 16).