Change in UK Tax Law Would Raise Price of Apps and Music

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New UK legislation may see the price of apps, music and other online purchases go up, as a VAT loophole is closed.

The proposed change in the tax law would see consumers in the UK pay 20% VAT, instead of the lower foreign rates they have been accustomed to.

Companies like Amazon and Apple are currently allowed to sell their products through countries with lower tax rates like Luxembourg, which has 3% VAT.

The Guardian reports that the change, proposed by Chancellor George Osborne in the latest Budget, would ensure that online purchases are taxed in the country where they were conducted.

This would spell the end for 99p song prices, and would also drive up the cost of apps, e-books and other digital content.

The Budget document said: “As announced at budget 2013, the government will legislate to change the rules for the taxation of intra-EU business to consumer supplies of telecommunications, broadcasting and e-services.

“From 1 January 2015 these services will be taxed in the member state in which the consumer is located, ensuring these are taxed fairly and helping to protect revenue.”

Official figures estimate this move could raise £300m for the Treasury.

Research by Greenwich Consulting found that Britain could have covered the cost of the Olympic Games from the VAT raised by the sales of digital services between 2008 and 2014.

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