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

[abhibeckert]

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?

I'm not sure how it works in UK, but in Australia it would be criminal for Apple to "absorb" the VAT. They are required to charge a specific price and then *add tax on top of that*. You're not allowed to just pay the tax.

VAT is not a tax that Apple has to pay, it is a tax the consumer has to pay. Apple's just collecting it on your behalf, they are not allowed to pay it for you.

 

[grimleaper]

Why is this an issue, if the OP had done the smallest bit of homework, they'd see at the point of sale 20% is already being charged to the consumer in the UK!

http://store.apple.com/uk/help/payments

See the FAQ bit re VAT charged in the UK.

Oh BTW if Apple then subsequently increase prices to pass on the extra tax, then that's called VAT fraud. Different story If they were open an said the UK were getting a lower price due to paying another countries rate.

 

[AdonisSMU]

As if it isnt expensive enough to live in the UK.

 

[Frizers]

Bloody hell chaps. Now a £13.99 film which has been out for a year will be even more ridiculously priced.

 

[abhibeckert]

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!

I don't think it will work that way. Consumers like nice round figures and Apple tends to stick to them as well.

All prices are set in US dollars, and then it gets rounded to the nearest "nice" price in your local currency.

For example in Australia an app that in 99c in the USA will still be 99c in Australia, but a $9.99 app in the US will be $12.99 in Australia.

I'm guessing the cheaper apps won't change price at all, but the higher priced ones will. If the VAT is increased from 15% to 20% they will change their conversion so that a 99c app in USD will be 83p plus 20% tax, bringing it to the same 99p. But with higher priced apps you will see a price increase.

 

[elolaugesen]

Taxes

Great...only fair......will help pay for the benefit society..... Sorry.... But all forms of tax avoidance must be stopped... It is only time the tax system is updated to reflect the new world so that all businesses operate on an equal base. It is also time all internet stores pay taxes like a business on high street.

If the uk is then overtaxed then the whole system should be overhauled. At least every business are operating on equal terms.

 

[SBlue1]

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.

You are not quite right. When you buy a suit in Italy you pay the Italian tax but when you import that suit you have to pay the British tax again at the customs at the airport.

Seems fair to pay the tax on importet iTunes goods as well.

 

[danckwerts]

I don't want to pay more but...

I'd rather pay slightly more and see it going to the tax authorities in the country where it is sold than to Luxembourg. Ironically, I've previously paid more VAT for software sold by Adobe ostensibly from Ireland, back in the days when UK VAT was only 17.5%. Unfortunately, either way, most of the money ends up in the hands of the EU.

 

[VulchR]

I'd rather pay more taxes than see the UK increase its failure to support people when they're down. It's time that the people who can afford to pay for the common good to start anteing up instead of whining about taxes.

So we'll pay another 20p for a song. It still costs less that a bottle cola.

 

[bsolar]

You are not quite right. When you buy a suit in Italy you pay the Italian tax but when you import that suit you have to pay the British tax again at the customs at the airport.

You are also eligible for a refund of the Italian tax you already paid.

 

[Jambalaya]

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.

If you have no VAT people with no income (i.e. living off savings) pay no tax nor do any tourists / business visitors. Almost all countries have a sales tax (or VAT) including the US where it varies by state. In Singapore the sales tax is at a higher rate than many people pay income tax at. VAT is not levied on essentials like food or rent and in the UK now the first £10k of earnings is free of income tax - moral enough ?

 

[CausticSoda]

I'm not sure how it works in UK, but in Australia it would be criminal for Apple to "absorb" the VAT. They are required to charge a specific price and then *add tax on top of that*. You're not allowed to just pay the tax.

VAT is not a tax that Apple has to pay, it is a tax the consumer has to pay. Apple's just collecting it on your behalf, they are not allowed to pay it for you.

What he means is that Apple (or whoever) just lower their price by the amount the tax is. The tax is all paid and above board, but the company just charges less for the product.

 

[Luke Redpath]

You are not quite right. When you buy a suit in Italy you pay the Italian tax but when you import that suit you have to pay the British tax again at the customs at the airport.

Seems fair to pay the tax on importet iTunes goods as well.

Import taxes aren't relevant as downloads are not goods, they are services.

 

[mheaford]

You are not quite right. When you buy a suit in Italy you pay the Italian tax but when you import that suit you have to pay the British tax again at the customs at the airport.

Seems fair to pay the tax on importet iTunes goods as well.

Italy is in the EU (just like Luxembourg) so you wouldn't have to pay UK VAT on it when importing it.

http://www.hmrc.gov.uk/customs/tax-and-duty.htm#3

 

[nebo1ss]

MacRumours appear to be Mathematically challenged. If the apps are presently being taxed at 15 percent because they are sold out of Lux and the new rate is 20 percent because the end customer is in the UK.

Somehow that seems like a 5 percent increase to me.

 

[CausticSoda]

MacRumours appear to be Mathematically challenged. If the apps are presently being taxed at 15 percent because they are sold out of Lux and the new rate is 20 percent because the end customer is in the UK.

Somehow that seems like a 5 percent increase to me.

Actually, I don't think your maths is quite right. If an item costs £100 plus 15 % tax, that makes it £115. If tax goes up to 20 %, it would now cost £120. That is an increase of 4.3 %...

 

[Luke Redpath]

Lots of comments on here from people who don't understand how EU VAT works.

Firstly, while there are general rules for where VAT should be charged on goods and services there are various exceptions for certain goods and services and also some differences for certain services based on where they are used and enjoyed.

For those saying this isn't compliant with EU law: you're wrong. The whole point of this UK law change is to make UK VAT law compliant with EU wide changes to how VAT is charged on certain services, notably electronic services like downloads, from Jan 2015.

Don't think this will just affect the UK, it will affect other EU countries too.

As has been mentioned the motivation for this change is to stop large companies gaining a competitive advantage over local businesses by setting up shop where VAT rates are lower (Luxembourg mainly). This is particularly notable for ebooks as the rate is only 3% vs 20% in the UK. So expect the biggest price increases to be on ebooks.

The biggest problem is the impact this will have on smaller businesses, ironically, as it will mean any VAT registered UK company selling downloads will have to charge and account for VAT in the buyers country.

To keep things simple the UK government will be introducing the Mini One Stop Shop (MOSS) which will allow sellers to register for VAT in just one country (the UK) and the UK (HMRC) will remit the VAT to other countries for you.

Either way it still sounds like a burden to me.

IMO it would have been far simpler to harmonise rates on electronically supplied services across the EU given their intrinsic nature, but this would have been at odds with allowing countries to set their own VAT rates.

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MacRumours appear to be Mathematically challenged. If the apps are presently being taxed at 15 percent because they are sold out of Lux and the new rate is 20 percent because the end customer is in the UK.

Somehow that seems like a 5 percent increase to me.

Actually it would be a 4.3% increase on the VAT inclusive price.

 

[OllyW]

Apple have always been reluctant to let you know how much VAT you pay on iTunes purchases and the receipts they issue don't state the rate of VAT.

They are not very helpful when business customers request VAT receipts so they can claim back the tax, even though they are obliged to if the customer asks for one.

 

[nebo1ss]

Actually, I don't think your maths is quite right. If an item costs £100 plus 15 % tax, that makes it £115. If tax goes up to 20 %, it would now cost £120. That is an increase of 4.3 %...

I knew as I was writing that I would probably get picked up on it. You are right of course its actually 4.347 percent. I was just being lazy.

 

[Nightarchaon]

And thats me done with iTunes as a purchase medium, guess ill stick with ripping blu-rays and netflix

 

[Luke Redpath]

Apple have always been reluctant to let you know how much VAT you pay on iTunes purchases and the receipts they issue don't state the rate of VAT.

They are not very helpful when businesses request VAT receipts so they can claim back the tax, even though they are obliged to if the customer asks for one.

I've heard this but trying to reclaim VAT on app purchases seems like a bit if a waste if time to me as reclaiming cross border VAT isn't straightforward. You can't just stick it on your UK VAT return as you haven't been charged UK VAT. I wonder how many people who pester Apple for a VAT receipt even realise they aren't being charged UK VAT and as such their attempts to reclaim the VAT will likely be fruitless?

Normally, a B2B sale of software would be subject to the reverse charge, meaning the seller would zero rate the supply and the buyer would account for the VAT as both the supplier and buyer on their VAT return, meaning there would be no VAT to reclaim overall.

However, Apple are quite clear in their terms and conditions that all sales are non commercial and therefore they treat all sales as B2C meaning they aren't obliged to reverse charge the sale.

I'm not sure pointing to HMRC guidance on issuing VAT invoices is really relevant to a Lux. registered trader either.

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For those saying Apple should absorb the VAT increase; remember you're also effectively asking the developer to absorb the increase to. The 70/30 split is of the sale price net of VAT.

I could see this going either way. An inflated, 10p increase across the board, or Apple absorbing the cost to keep the 99p price point which is a huge difference psychologically to £1.09 or even £1.05. If this happens, the only real losers will be the developers.

 

[OllyW]

However, Apple are quite clear in their terms and conditions that all sales are non commercial and therefore they treat all sales as B2C meaning they aren't obliged to reverse charge the sale.

So why did they cave in and issue the receipt.?

Though the Revenue would not confirm that it was acting on his behalf, this month - with no explanation or any more exhortations to 'have a nice day' - he got his receipt after a three-month campaign-Apple confirmed that anyone-requesting a receipt from iTunes store or the Apple App store could now have a VAT-registered receipt whether the artice was used for private or commercial use.

Read more: http://www.thisismoney.co.uk/money/...AT-receipt-for-iPhone-apps.html#ixzz2wsPWQGsV

 

[hsotnicam8002]

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.

In the UK, VAT is 20% (zero on hardcopy books, BTW), so ...

(From Apple webpage):

Why do I pay 23% VAT on Electronic Software Download orders and other products which are classified as services?

The VAT rate for Apple customers who purchase Electronic Software Downloads or other Apple products which are classified as services under EU VAT law will be 23% Irish VAT. This is because the place of supply of these products under EU VAT law is Ireland as the country from where Apple Distribution International makes these supplies.

 

[Luke Redpath]

So why did they cave in and issue the receipt.?

To make you go away? Maybe Lux. VAT rules also stipulate that Apple have to give a VAT receipt on request. Who knows. You're still going to struggle to reclaim the VAT anyway.

Like I said, most people have probably requested VAT receipts from Apple/Amazon thinking they can simply reclaim the VAT on their UK VAT return only to find they can't as it's not UK VAT.

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In the UK, VAT is 20% (zero on hardcopy books, BTW), so ...

(From Apple webpage):

Why do I pay 23% VAT on Electronic Software Download orders and other products which are classified as services?

The VAT rate for Apple customers who purchase Electronic Software Downloads or other Apple products which are classified as services under EU VAT law will be 23% Irish VAT. This is because the place of supply of these products under EU VAT law is Ireland as the country from where Apple Distribution International makes these supplies.

Worth noting that whilst the above quote refers to software downloads purchased through the Apple Store (which is based in Ireland) not the App Store, this will also be affected by the new VAT changes. Apple Ireland will also be required to charge UK VAT on downloads instead of Irish VAT.

 

[merkava]

Unbelievable that people cannot grasp simple economic concepts. It says right there in the story that prices will increase. Ergo YOU are paying the tax, not Apple.

Who cares though, right? Screw Starbucks, Amazon and Apple, tax them all to hades.

"Oh, that's weird, my coffee costs 25p more! Derpy derp derp, damn corporations!

https://www.youtube.com/watch?v=YmqoCHR14n8

"There's a belief that somehow or other you can tax business without consumers, or workers, or individuals paying for it, somehow business is a big source - a big cornucopia out there that can be taxed at no cost.

Can you tax business? What's 'business'? There's no business to be taxed! There are people, only people can pay taxes.

Can I tax this floor? Can I tax the building? The building can’t pay taxes. Only people can pay taxes. So when you talk about a tax on business, it has to be paid by somebody. Either it’s paid by the stockholder, or it’s paid by the customer, or it’s paid by the worker." - Milton Friedman