Google Play

New rules see standard VAT of 20% to be paid from January 1 2015

Buried within the recent Budget, it seems that UK Chancellor, George Osborne, has announced that digital content downloads will pay tax based on the country they are sold in. In other words all content from Google Play, Amazon, iTunes and so on, will be subject to the standard UK rate of VAT at 20%.

That's a pretty substantial increase on the rate of tax paid when the content is sold through other European countries, such as Luxembourg, and could bring an end to the 99p song download and raise the price of books, apps and games. The rules are set to come into effect on January 1 2015. For the Government it means more revenues, for the rest of us it just means that something else we love will cost more money.

Source: The Guardian

 

Reader comments

UK closes tax loophole on digital downloads, Google Play prices likely to increase

76 Comments

The sad truth is that corps are managed by budgets. Budgets are created by analysts. These analysts will say that the revenue will decrease from UK. They'll have to elaborate: how about we make up the revenue by increasing prices not just in the UK but elsewhere where elasticity is low... and that's when it'll affect other countries outside the UK.

Tip: review the difference between effect and affect.

affect1

əˈfɛkt/

verb

verb: affect; 3rd person present: affects; past tense:affected; past participle: affected; gerund or present participle: affecting

1.

have an effect on; make a difference to.

"the dampness began to affect my health"

synonyms:influence, exert influence on, have an effect on, act on, work on, condition,touch, have an impact on, impact on, take hold of, attack, infect, strike, strike at, hit;

Posted via Android Central App

tosser

ˈtɒsə/

noun

noun: tosser; plural noun: tossers

1.

a person or thing that tosses something.

"a contest to find the best pancake-tosser"

2.

BRIT.vulgar slang

a person who masturbates (used as a general term of abuse).

Posted via Android Central App

A-typical UK government. Increase on everything. Sometimes they make it really difficult....

Posted via Android Central App

No I'm sure they're not but in the UK we seem to be getting hit at every juncture. I agree that it brings digital media in line with physical but it just seems like another way to squeeze money out of us.

Although I've just a report that iTunes users may see a reduction in cost since they charge a VAT of 23% based on Irish origin.

Posted via Android Central App

I'm not happy about it either but at the end of the day why should it be exempt from VAT if physical media isn't?

I think we've been lucky to go this long without having to pay it.

Posted via Android Central App

Don't take this the wrong way, but that is the attitude the politicians use to keep adding on taxes like this. Not that this should be the tax Brits use to make a stand, but some day your going to have to. I don't see any governnents, except maybe a few state governments in the US actually lowering taxes anytime soon.

Sent from my bathroom

Lower taxes means lower services. And those states that are considering lowering taxes already have some of the worst schools and infrastructure in the nation. But hey, it's worth it to pay $40 a year less per person right? The US needs lower taxes like it needs a hole in the head.
Posted via Android Central App

LOWER SERVICES? Get off your butt and try doing something for yourself. New Hampshire=low taxes. Check their student's standardized test results at all grade levels. Probably higher than your state. brendilon--> lives off taxpayers.

Ah well. That means that prices will be almost in line with here in Belgium for me. That's better for my pocket, the difference in cost has been a real strain. Trust me the cost of goods and services in the UK still aren't that high.

Posted via Android Central App

Rip off Britain once again. And good old Tories, hit android while apple still avoid tax. Steve jobs ghost is a Tory.

Posted via Android Central App

"n other words all content from Google Play, Amazon, iTunes and so on, will be subject to the standard UK rate of VAT at 20%."

The order of operations for the internet: Read, think, post. People (including me) seldom follow this.

Posted via Android Central App

I don't know about you, but as a sensible high tax paying individual, I am happy about this even though it means a price increase. More money raised for the exchequer = more public spending/less tax elsewhere.

Posted via Android Central App

Healthcare is paid out of general taxation. Roads are responsibilities of local and national government depending on their classification.

Posted via Android Central App

It depends on what they plan on using the income for. Taxes here in the US such as Social Security get used in government 'welfare' programs; however, other taxes are what the government uses to fund their own fat wallets. My guess is that people in the UK won't get any more benefit after this tax comes in effect than was before.

Got Nexus?

I wish you could see how much tax I paid this month while my jobless neighbours sit on there arses in a house exactly the same as mine that the government pays for

Posted via Android Central App

Wait, so people in the UK are as disgruntled about taxes as people in the US? But people in the US still hear from other people in the US how we should be more like the UK. They have better healthcare, etc. Partly because of the VAT.

We should throw some tea into some water over this tax thing.

Posted via Android Central App using an LG G2.

Allegedly, in the UK we're seeing cuts and reforms left and right, won't be long till everything's privatised and we're just like the US, but with much higher tax rates.

Posted via Android Central App

You mean like health care and housing for the 3rd world immigrants who arrive in the UK?

Posted via my Motorola Startac

I'm just going to put this out there to our UK friends.... The entire American Revolution was fought over less than a 5% tax.... VAT is theft.

Well, to be more accurate it was about taxation without representation. It wasn't the tax so much as the fact the colonies had no voice in how it was spent and saw little if any benefit from it, Americans still pay VAT you just call it "sales tax".

Your point is still valid though.

Posted via Android Central App

His point isn't valid, his point is completely false. He sounds like one of those TEA Party morons that sits around holding a sign that says "No Taxation Without Representation". You HAVE representation dipshit!

Posted via Android Central App

Are you sure you aren't naively assuming that democracy works exactly as advertised?

In any case, a better summary of the Tea Party position is that they want to reduce the size of the state. Is it moronic to want that? Are increases to the size of the state never moronic, and decreases always moronic? Or is there a maximum size? Do all sensible people agree on the same size?

Downloads are subject to VAT now, its just that some companies are registered in Luxembourg, where VAT is lower, so we pay that rate. This doesnt mean the price will be 20% higher.

The standard rate is 15% in Luxembourg, rising to 17% in 2015 anyway, so you will only pay the extra 5% compared to what it is now, and 3% compared to what it will be.

We already pay 11p tax on a 69p download, if we paid 20% VAT out the 69p it would be 13.8p tax, so we are talking pennies increase to accomadate the new rate

At least the UK aren't as funny as us here in Sweden. Books and magazines have a lower tax then the standard 20% (or was it 25%), but e-books are seen as digital media and not a book. Thus they have the standard tax. E-books have also been known to be "out of stock", but that is a different story ;-)

Posted via Android Central App

Same in the UK. Physical books are zero rated i.e. 0% VAT, ebooks are 20%, as digital media. Total nonsense that should be addressed.

Don't the developers already pay taxes on their earnings at tax time in the UK?? With Google play's 30% fee and now 20% for taxes they only end up getting half of what we pay for their apps, if they pay taxes on the same apps at the end of the year how much could our independent developers really end up earning on their apps?

Posted via Android Central App

You're Wrong, A developer will set their price and then the V.A.T gets added after, the V.A.T does not come out of the developers pocket, its an extra the buyer pays.
Example: the dev sets his price at £1, then 20p gets added at point of sale, so the customer pays £1.20

Are they idiots because the increase is inconsequential? At what rate of taxation does it become non-idiotic to build up a froth?

Yes, and the developer will then pay 40p in income tax (or at least I would). So for the developer to make 60p, the customer has to pay 1.20.

Actually, you only pay 40p on earnings over £42,000 (ish depending on tax code). So you earn double the average wage AT LEAST. That is how a modern economy works. The rich pay more

Posted via Android Central App

On a related note this will likely push up prices on services like steam and GOG, I wonder where things like Netflix and all access stand what with them being digital
services rather than digital goods...

May not seem like a huge deal, but it feels like we're being killed by inches.

Damn I hate that scumbag Osbourne! (Not cause of this, just in general.)

Posted via Android Central App

Well don't like the idea of apps getting more expensive to pay the gov, though maybe this will stop me from just buying apps because it's 99p. Have brought many apps because of its low price that I barely used.

Posted via Android Central App on nexus 7 (2nd gen)

Also they aren't losing half of their post. You don't add the percentages its basic algebra. And that tax is outrageous...

Posted via my Note 3

Why is it outrageous? The tax will go from 17% up to 20% and you will be paying it to your own government, not a foreign one.

The US should really have an online sales tax. But to make it simple for the developers, have it set by and paid to the federal government who will then dole it out to the states along the same proportions used to dole out seats in the House.

I pay enough taxes already. I don't need to pay for something bought from a company that doesn't have a physical presence in my state.

After income taxes I get raped with property taxes to pay for crap the schools don't need. Sports stuff for the jocks, new fields, bleachers ect. When they should be spending it on education.

Posted from my LG LS970 using my thumb

The reality is that most apps wont change in price at all. Companies like to maintain certain price points, so when tax rises slightly they usually absorb the cost. Either Google. or the dev will absorb this cost.

This is a great way to encourage us to buy content rather than illegally download it. Bloody stupid idea.

Posted via my Z10 using Android Central App

It's not THAT bad news for music downloads. As I understand it, only ebooks benefit from the 3% VAT rate at present. Music downloads are subject to Luxembourg's full 15% VAT rate which means that our music SHOULD only rise by a maximum of 4.2% over what we currently pay. Don't forget that VAT is charged on the pre-tax price so it's not a full 5% increase on the 99p price gross of VAT. This would mean that a song previously sold for 99p should only rise to 103.3p. As we already ARBITRARILY pay the same figure in GBP as the US do in USD or Europe do in EUR then this should be a small increase that the music retailers could readily absorb.

Oh yes... Where has this 3% VAT rate come from on ebooks anyway? Yes it used to be the case that ebooks were subject to only 3% VAT but in 2012 the EU mandated that Luxembourg (and other countries) charge the EU minimum rate of 15% so closing Amazon's VAT profiteering loophole. So the same applies to ebooks as I wrote above for music downloads.