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

[diddl14]

Sounds like real bad news for Luxemburg as they currently take 15% of any App sold in Europe

As others have already stated, the actual change in price is only the difference between Lux VAT and local VAT. Positive is that the VAT will go to the country of residence and not to a foreign government.

 

[charlituna]

In a way I applaud this. Why? Because rather than saying that Apple is acting within the law but shouldn't (simply because they are Apple) they are changing the law. It is their laws that let companies do this kind of move as well as the whole 'avoiding' corporate taxes by having their offices in a different country.

This is the very thing that Tim told the US to do if they want more money, rather than their current 'but you have so much money' BS.

And I don't agree that Apple should eat this money. It should be a share between both parties and if they dont both agree to give up some money, raise the price. Anyone complains, point them to the legal change, so they can gripe at the right folks

 

[theluggage]

I'm notnsurenehat UK laws are. In the USA, a company legally can not decide this. All taxes must be listed SEPPARATELY from retail value and charged as such.

Correct - it has to be listed separately. For one thing, only consumers and very small businesses actually pay the VAT: if you are a business that charges VAT on your own products or services, you get to claim the VAT back on any materials/supplies/equipment you buy (that's where the 'value added' bit of 'Value Added Tax' comes in).

However, that doesn't mean that Apple couldn't cut their pre-tax prices by enough to negate the effect of the tax if they wanted to. Not that they'd want to.

 

[springsup]

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?

VAT typically does not cover food and drink, as well as a huge number of other things. It typically applies to non-essentials, only.

Food and drink for human consumption is, in general, zero-rated but many items are standard-rated, including alcoholic drinks, confectionery, crisps and savoury snacks, hot food, sports drinks, supplies of food made in the course of catering including hot takeaways, ice cream, soft drinks and mineral water.
Because certain food and drink is zero-rated, so too are certain animals and animal feeds, and plants and seeds - if the animal or plant in question produces food that is normally used for human consumption.

 

[jjrtiger]

Why in the world would Apple pay your sales tax? Any company sets the price they want for an item. Sales tax isn't a price increase, it's a charge your government imposed for the privilege to buy something. Don't like it? Complain to the government.

All of these things you demand for free are not free. Corporate taxes are added to product price. Mandatory warrantees are added to product price. 'Free' healthcare is paid for by higher taxes. Anytime you require a company or government to provide a good or service you're going to end up paying for it somewhere.

Bingo. I am amazed that people do not understand this.

 

[Gasu E.]

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?

You want me, an Apple stockholder who is not allowed to vote for your tax laws, to pay the tax, so that people who actually voted for the representative governments that instituted the tax don't have to pay it?

How would that be fair?

 

[CGJay]

You want me, an Apple stockholder who is not allowed to vote for your tax laws, to pay the tax, so that people who actually voted for the representative governments that instituted the tax don't have to pay it?

How would that be fair?

While I agree with your point, I fail to see how you directly would be paying for the tax. Do you actually invest money into Apple that they can spend?

 

[bigchrisfgb]

I'm not sure how that is compliant with EU law.

Value Added Tax or Retail Tax is always paid in the state of purchase for goods. If I buy a suit from Italy I pay Italian tax on my purchase. If I buy a CD from Estonia I pay Estonian tax and if I buy some music from Luxembourg I am paying Luxembourg tax.

If I am therefore paying tax in the country of purchase as the law states.

if VAT wasn't so high in the UK due to the policy of low direct tax and high indirect tax, companies wouldn't want to sell goods in the state with the lowest consumer tax which only benefits us as consumers.

If Osborne and Cameron think they can get a change in the law here they may have a tough fight as the EU Parliament elections are this year and the other state leaders may not be willing to see money flow out of their country towards the place of the end user instead of the purchase.

Perhaps the Cameron regime would be better to look again at the Commision proposal to eventually harmonise VAT levels across the Union. That way there would be less incentive to set up a business in another state.

The things is though you will be buying a song/TV show/etc in the UK, so therefor you have to pay tax like you would when you buy a suit in Italy. Also just taking your examples, you do realise that if you bought a suit in Italy and brought it to the UK you would have to pay import duties to the UK despite paying a tax to the country where you bought it from.

All of this is compliant with EU law, there are no EU laws forbidding the implementation of taxes within any EU country. Also this law is an existing law, however it is just now that they are collecting these taxes.

 

[Gasu E.]

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 missing the fact that the most important factor in pricing is the competition, and this tax will hit the direct competition as well. There will be very little reason for Apple not to pass these costs on to the consumer.

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While I agree with your point, I fail to see how you directly would be paying for the tax. Do you actually invest money into Apple that they can spend?

As a shareholder, I own a share in Apple's profits. My stock price is based on the market expectations of Apple's future profits. If Apple paid a tax that caused a hit to their profits, the value of my assets would go down. That's the same as money out of my pocket.

 

[bigchrisfgb]

You want me, an Apple stockholder who is not allowed to vote for your tax laws, to pay the tax, so that people who actually voted for the representative governments that instituted the tax don't have to pay it?

How would that be fair?

I see your point, but can I point out that the UK consumer actually pays more than the US consumer does in iTunes thanks to the currency exchange rates, in fact even if Apple received 20p less from each UK 99p sale the UK consumer would still be paying more than the US consumer does.

Interestingly only Mexico consumers pay less on iTunes than US consumers and that is by 1 US Cent, every other country pays more than the US consumer.

 

[Soni Sanjay]

I see your point, but can I point out that the UK consumer actually pays more than the US consumer does in iTunes thanks to the currency exchange rates, in fact even if Apple received 20p less from each UK 99p sale the UK consumer would still be paying more than the US consumer does.

Interestingly only Mexico consumers pay less on iTunes than US consumers and that is by 1 US Cent, every other country pays more than the US consumer.

Yeah, $1 USD = 13.26 pesos, and that is including the "IVA", which is exactly the same thing than the "VAT" but in spanish. So actually is more like 2 cents less than the US plus your tax, so it could be up to 3 or 4 cents, not that it is that much of a saving but it is certainly less than what the European countries pay.

 

[iolinux333]

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

. It's hilarious you *exactly* proved the point.

 

[Dorje Sylas]

I'd point out that the United States already went over this. Keep in mind you EU people, that while we are one country, our states could very well be countries in their own rights. Way back, things you baught on the Interent weren't taxed by various state sales taxes, because they were being "baught" in a different state (mainly California).

This ended fairly quickly once states figured out how they could apply sales tax to out of state Internet purchases. It even goes so far that if a website doesn't charge us sales tax for our state up front we have to report it come tax day ourselves.

Sounds to me like the UK figured out the same thing.

 

[Redneck1089]

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

Not in America.

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All of them things aren't what's wrong with the UK, they're what's wrong with the entire world, maybe you'd be better off in Uganda. Hang on, no, you wouldn't.

For a westernized and first world country it's in a shockingly bad state. I'm not talking about the third world.

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

Not so much that it's a joke in the overall scheme of things; it's just that it's laughable that people will have just that little tiny bit more to pay when they are already taxed out of oblivion for everything under the sun.

 

[dampfnudel]

And your nationality is what......?

Because if your an American, I suggest you look in the mirror first.

Many of us have and many of us are making changes in our own way. One of the first changes was to elect President Obama. The jury is still out on that, but anyway it was a change that Europeans could learn from. It was still a good change, no matter how murky the 2nd term becomes (typical with most 2nd terms). Healthcare...we'll see what happens. Some improvement there, but not nearly enough of course. We're a little more aware of our negative contribution to the environment and thanks to higher gas bills and our children, we're beginning to realize that smaller is better and waste is wrong. Americans are even beginning to lose weight and make better health choices. Still, there's a lot more to do, a lot, but at least more attempts are being made now than ten years ago. Now, if only others around the world, some Russians for example, would do the same. Europeans as usual are a diverse bunch, so it's hard to point a finger in that direction. Just as it should be difficult to paint every American with the same brush.

 

[bobbybob]

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.

 

[Scrumper]

Damn. Better get myself a copy of Logic X and stop convincing myself 9 is enough for the next 10 years...

Definitely do it. Logic Pro X is amazing!

 

[bobbybob]

Might I suggest you pick up a dictionary and look up the word 'bought'?!! Others might take you more seriously then!

I'd point out that the United States already went over this. Keep in mind you EU people, that while we are one country, our states could very well be countries in their own rights. Way back, things you baught on the Interent weren't taxed by various state sales taxes, because they were being "baught" in a different state (mainly California).

This ended fairly quickly once states figured out how they could apply sales tax to out of state Internet purchases. It even goes so far that if a website doesn't charge us sales tax for our state up front we have to report it come tax day ourselves.

Sounds to me like the UK figured out the same thing.

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Blah... blah... blah.. what does this have to do with the discussion in hand?!!

Many of us have and many of us are making changes in our own way. One of the first changes was to elect President Obama. The jury is still out on that, but anyway it was a change that Europeans could learn from. It was still a good change, no matter how murky the 2nd term becomes (typical with most 2nd terms). Healthcare...we'll see what happens. Some improvement there, but not nearly enough of course. We're a little more aware of our negative contribution to the environment and thanks to higher gas bills and our children, we're beginning to realize that smaller is better and waste is wrong. Americans are even beginning to lose weight and make better health choices. Still, there's a lot more to do, a lot, but at least more attempts are being made now than ten years ago. Now, if only others around the world, some Russians for example, would do the same. Europeans as usual are a diverse bunch, so it's hard to point a finger in that direction. Just as it should be difficult to paint every American with the same brush.

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VAT is not sales tax.

If a company buys 100 pieces of lead, and then turns them into 100 pencils, it pays VAT on the cost of the 100 pieces of lead, put offsets it against the sale price of the 100 pencils.

Set up a an IT company? Buy a load of computers? In the UK, you can reclaim the VAT on them. If your company is successful, great: You pay the VAT. If your company is a failure, then the government foots the VAT bill.

That's the difference between sales tax and VAT.

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.

 

[bobbybob]

At the moment, if I buy an app that costs £20, it will be invoiced via Luxembourg [probably] and I will be paying 15% VAT. So, £17.40 for the item, and £2.60 to the place of purchase.

If I buy the app where I consume it [the UK], for my £20, I will be paying £16.67 to Apple and £3.33 to the UK tax authority, or 73p more. The 20-30% figure circulated is the difference between the two numbers: the difference between £2.60 and £3.33. Or about 75p.

 

[peterdevries]

[/COLOR]

Because in the UK American companies make an absolute killing with vastly, and I MEAN vastly inflated prices.

Take the iPhone 5S 16gb, in the US it is $649 on the Apple website so I guess tax not included, here in the UK on Apples website with our tax it costs $905.

So in the UK with tax I pay $256 more, and that is par for the course. I think some of you need to understand that before bloating, why should Apple absorb the cost...

You assume that Apple therefore has a higher profit margin in the UK, and that is most likely very wrong. Employee taxes in the UK are vastly higher than in the US. This is a tax that is unavoidable. In addition European laws dictate that there is a manufacturer warranty of two years on items bought in the EU. This requires Apple to extend their support for an extra year, which is increases the base cost and decreases the profit margin. Add to that that real estate is more expensive in Europe, meaning that the Apple stores are more expensive here, another factor that should impact the base cost of products sold here.

There is no point in making assumptions on profit margins based only on the price if you don't understand the cost basis very well.

 

[patent10021]

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?

Then whoever made the law/loophole should unloop it. Not Apple's fault.

If someone says to you "hey, you can avoid (not hide) 50% more tax what would you do? Say "oh forget it, Id rather pay the extra 50%"?

If they feel that sales are slipping enough to warrant paying VAT then they obviously will. I think they're capable of understanding their own situation.

 

[hagar]

I'm not sure how that is compliant with EU law.

Value Added Tax or Retail Tax is always paid in the state of purchase for goods. If I buy a suit from Italy I pay Italian tax on my purchase. If I buy a CD from Estonia I pay Estonian tax and if I buy some music from Luxembourg I am paying Luxembourg tax.

If I am therefore paying tax in the country of purchase as the law states.

if VAT wasn't so high in the UK due to the policy of low direct tax and high indirect tax, companies wouldn't want to sell goods in the state with the lowest consumer tax which only benefits us as consumers.

If Osborne and Cameron think they can get a change in the law here they may have a tough fight as the EU Parliament elections are this year and the other state leaders may not be willing to see money flow out of their country towards the place of the end user instead of the purchase.

Perhaps the Cameron regime would be better to look again at the Commision proposal to eventually harmonise VAT levels across the Union. That way there would be less incentive to set up a business in another state.

Not true: as a merchant in the EU you always add tax according to the country the customer lives in. Maybe there's an exception for the UK?

 

[coldsweat]

We in the UK already pay 15% VAT on iTunes downloads supposedly, so if we need to pay 20%, that would mean an increase to £1.03 for a currently 99p download!

 

[szw-mapple fan]

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.

Apple should absorb that imo. The app store earnings don't really account for much revenue. If Apple keep the App store filled with lower cost quality apps it might boost their hardware sales. But thats probably not happening.

 

[Eraserhead]

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.

So that means we should just give up and let the big accountancy firms get away with it?