Price of digital music and apps set to skyrocket
THE PRICE of digital goods – such as music, ebooks and mobile apps – sold by some of the largest technology companies could jump after a tax loophole that allowed firms to avoid paying VAT on their sale is closed next year.
The change, if passed on to customers by a price increase, could see the cost of an average music download jump from 99p to £1.16.
Under existing rules Apple and Amazon sell virtual goods through offices in Luxembourg, where they are taxed at local rates of just three per cent.
Under the new rules, put forward by chancellor George Osborne in a position paper last week, virtual goods would be taxed at the point of consumption increasing the tax liability to 20 per cent.
“From next January VAT will be charged in the country where goods and services are consumed rather than where the supplier is based. This was leading to some companies deliberately locating in countries with a much lower tax rate,” said Osborne in the report. “We expect VAT receipts to increase by £300m a year as a result,” he added.
Apple and Amazon both declined to comment.