British consumers face iTunes price hike after tax policy change

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Comments

  • Reply 41 of 55
    crowleycrowley Posts: 10,453member
    lukei wrote: »
    By who? By Labourites with very short memories of the total mess Brown and Balls left this country in?
    By doing what?

    The banking crisis was not made by the Labour government, and any measures they could have taken to avoid it certainly wouldn't have been taken by a Conservative government, nor were they argued for by any opposition save Vince Cable. On the other hand the Tories have raised VAT hitting low and medium earners in the wallet (Labour reduced it for their final year), crippled HMRC and the UKs ability to meaningfully pursue tax revenue, cancelled the 50% tax rate forgoing billions, written off huge sums owed by multinationals, and meanwhile poured blame upon the poorest, the most vulnerable, and immigrants, while increasing censorship and restricting civil liberties.

    Scotland was being discussed elsewhere, but if Scotland does gain independence it will be a disaster for the people of England for no other reason than gifting the Parliament to the current Tory nightmare for the foreseeable future.
  • Reply 42 of 55
    MarvinMarvin Posts: 15,441moderator
    asdasd wrote: »
    The EU should do this with corporation tax, decide a tax and hand 12 percent to the EU and 12 percent to the country of "domicile".

    It would be better to split the corporation tax too but I still think they could simplify everything by having the banks deal with it and tax transactions. Say you buy something on iTunes Luxembourg while in France, you'd do so using a French bank. This bank can charge a percentage on the transaction and send it as tax automatically to the right tax authority. If you pay your rent, they do the same, if you draw out cash, they'd do the same (as they can't track the cash transaction). Think how many transactions happen all the time. If they skim that small amount, they'd surely make up the budget. I did a search for some transaction value stats and someone has worked them out here:

    http://simonthorpesideas.blogspot.com/2012/10/bis-transaction-data-for-2011-roughly-3.html

    and that links to a website setup around this idea:

    http://thetransactiontax.org
    http://thetransactiontax.org/overview/

    This would mean no tax returns at all and no tax authority required to chase individuals and businesses. No need to put tax amounts on e-commerce sites, no need to deal with poor accounting software. You just go about your business in whatever way makes a profit, no tax deductions needed, no need to pay employee income tax. No need for multi-state or multi-country rules, no need to setup tax havens.

    Every country just needs to implements this, let the banks skim the fees and you won't even notice. Making a smooth transition is the hard part but I don't see what could go wrong if they collected tax money at the end of a fiscal year like 2014 and then just said from that point, it's transaction fee based and no more tax returns. They can even bump up the fee to begin with to make sure they get enough. You would never notice even a 1% fee on everything. A $1000 rent payment would be $1010. Who cares about the $10 when it saves so much headache of tax returns and income tax?
  • Reply 43 of 55
    asdasdasdasd Posts: 5,686member
    I need to look at the links Marvin. But I already pay 23% VAT on most purchases and my landlord pays tax on rent etc. I can't imagine 1% would be enough.

    Possibly a tax on texts might help. Or email.
  • Reply 44 of 55
    hungoverhungover Posts: 603member
    Quote:

    Originally Posted by Marvin View Post





    iTunes downloads wouldn't be classified as services. This statement would refer to things like their financial services where VAT is charged on the repayments and controlled in part by Apple Distribution International in Ireland; not AppleCare though:



    http://store.apple.com/uk-business/browse/campaigns/macleasing



    If iTunes supplied from Ireland, the receipts would say Ireland instead of Luxembourg. It's not a 3% VAT rate in Luxembourg for music though, it's 15% for music, 3% for ebooks. Amazon uses the same setup:



    "Sales of digital products and services including Kindle content, Amazon Apps, Software & Digital Games (including prepaid gaming cards), MP3 downloads, Cloud Player, and Cloud Drive are shown inclusive of Luxembourg VAT rates of 15% (3% for e-books). For customers based in Iceland, Norway or Switzerland, Amazon will charge local VAT in line with local VAT legislation."



    https://www.amazon.co.uk/gp/help/customer/display.html?nodeId=502578



    The reason to use Luxembourg is:



    "Luxembourg has just half a million residents. But when customers across Europe, Africa or the Middle East — and potentially elsewhere — download a song, television show or app, the sale is recorded in this small country, according to current and former executives. In 2011, iTunes S.à r.l.’s revenue exceeded $1 billion, according to an Apple executive, representing roughly 20 percent of iTunes’s worldwide sales.



    The advantages of Luxembourg are simple, say Apple executives. The country has promised to tax the payments collected by Apple and numerous other tech corporations at low rates if they route transactions through Luxembourg. Taxes that would have otherwise gone to the governments of Britain, France, the United States and dozens of other nations go to Luxembourg instead, at discounted rates.



    “We set up in Luxembourg because of the favorable taxes,” said Robert Hatta, who helped oversee Apple’s iTunes retail marketing and sales for European markets until 2007. “Downloads are different from tractors or steel because there’s nothing you can touch, so it doesn’t matter if your computer is in France or England. If you’re buying from Luxembourg, it’s a relationship with Luxembourg.”"



    http://www.nytimes.com/2012/04/29/business/apples-tax-strategy-aims-at-low-tax-states-and-nations.html?pagewanted=3&_r=0



    It's not clear if the agreement is over the VAT rate or the income tax rate or both but this doesn't have to affect the prices of the songs because VAT is already assumed to be included. If songs are priced at 0.99 euros and there's 1m euros worth of sales, with Luxembourg taxes, the assumption is that this 1m euros represents ex-tax revenue x 1.15 so ex-tax revenue would be 870k euros. With UK taxes, ex-tax revenue would be 833k euros. Apple's cut would be 261k and 250k respectively, a pretty small drop.



    If Apple wanted to maintain their revenue, they can increase their 30% cut of ex-tax revenue (to say 32%) or just take a small amount less money. Apple already charges more for songs in the UK anyway. They are sold at £0.99 so if you deduct 15%, you get £0.86 = $1.42. I'm sure Apple can absorb the difference in tax and maintain £0.99. They still have to be competitive with Amazon and they'll face the same changes.

    Hi Marvin

     

    As far as the VAT man is concerned iTunes downloads are classified as services.

     

    Yes iTunes SARL is based in Luxembourg, where the applicable VAT rate is 15% and not the 6% quoted on most sites. BUT, and here is the big but, ~The digital portion of the deal incurs a VAT charge wherever the publisher’s subscription fulfilment company is based.~ In the case of Apple the fulfilment company is based in Ireland.

     

    I did email Apple last night for clarification. I explicitly asked them what rate of VAT is charged on iTunes purchases. I mentioned that iTunes are based in Luxembourg and I explained that I am a UK customer. Their response was vague in the extreme "we charge Sales and Use tax where we're required to by law. We estimate the tax that's shown on your iTunes store receipt, the final charge may be different".

     

    Perhaps it might be helpful if someone else tries, perhaps asking for a VAT receipt for their last purchase form ITunes.

     

    Apropos the reason for setting up in Luxembourg, I may well be wrong on this one but I believe that it is something to do with payments to smaller developers who are not VAT registered.

  • Reply 45 of 55
    asdasdasdasd Posts: 5,686member
    Hungover - but Ireland's standard rate is 23%. Does that apply to downloads?

    I've been googling and devs don't know. They don't mostly pay vat on Apples remittances to them but some make vat returns treating income outside the UK, as not subject to UK VAT - and pay vat on UK sales. Others do nothing.

    Seems totally confused.
  • Reply 46 of 55
    asdasdasdasd Posts: 5,686member
    Also when not vat registered you neither pay nor claim back VAT.
  • Reply 47 of 55
    What is slightly strange is that there is talk of iTunes sales falling big time.

    I suppose it is because whilst manufacturing extra profits by avoiding tax, iTunes still somehow manages to be the expensive way to buy music.
  • Reply 48 of 55
    Quote:

    Originally Posted by hungover View Post

     

    To the best of my knowledge Google and MS charge the VAT rate applicable in the country where the customer is though, so I doubt this will affect their customers full stop.


    Looking at my last receipt from Microsoft the VAT has been calculated at 15% which indicate Luxemburg.

     

    Interestingly when I get paid by Microsoft as an app developer they vary from paying me from Luxemburg and Ireland.

     

    I don't think the tax change will affect prices that much. Prices for apps ended up really low compared to regular software because a lot of it is developers building apps in their spare time who ultimately sell cheaply. The high level of competition also keeps prices low.

     

    When you set prices you also tend to pick a price in one currency and the store works out what it should be in all the others to have equivalent sales prices. You can do it manually but it's a bit of a pain and in all likelihood most developers aren't checking how much of the sales price there loosing in VAT.

  • Reply 49 of 55
    MarvinMarvin Posts: 15,441moderator
    asdasd wrote: »
    I need to look at the links Marvin. But I already pay 23% VAT on most purchases and my landlord pays tax on rent etc. I can't imagine 1% would be enough.

    It works because it taxes all transactions and there's no possibility of billions being hidden away. It also has the effect of compounding the percentage. If a single $100 amount gets exchanged 20 times between different people, then 1% becomes 1.01^20 = 22% but during each exchange, the transaction fee ($1) is negligible to the parties involved.

    This system would perfectly align the strength of a currency against the economic activity of the country. While it sounds crazy when you see the difference in the percentages, the value of all transactions going on far exceeds the value of taxable income at the end of a fiscal period. This might also put an end to microtransactions on Wall Street as they'd be taxed on every transaction.

    Where it would struggle a little is in countries that have a higher percentage of cash only transactions but that's the case with the current system anyway and there can be rules to cover that.
    hungover wrote:
    I did email Apple last night for clarification. I explicitly asked them what rate of VAT is charged on iTunes purchases. I mentioned that iTunes are based in Luxembourg and I explained that I am a UK customer. Their response was vague in the extreme "we charge Sales and Use tax where we're required to by law. We estimate the tax that's shown on your iTunes store receipt, the final charge may be different".

    Sounds shady, developers and buyers have had similar issues getting accurate VAT info because they need VAT receipts and Apple didn't used to give them out:

    http://www.thisismoney.co.uk/money/article-1690041/Apple-caves-in-over-VAT-receipt-for-iPhone-apps.html

    "Jeremy says: 'I was getting nowhere. They kept sending me emails wishing me a great day and Happy Christmas but refusing to send a VAT receipt because I was clearly a business and under their terms and conditions they could not send me a VAT invoice.

    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."

    https://discussions.apple.com/message/19796773#19796773

    "For some reason Apple are reluctant to issue VAT invoices. They cannot be optained via itunes or some web page for example.

    Recently I managed to obtain VAT invoices by contacting iTunes/Mac App store customer support.

    You must provide them with your billing address (same as on your itunes/app store account) and the receipt number of your purchase (found on the receipt they send you after every online purchase)."

    So you'd have to ask iTunes support for a specific VAT receipt for a specific purchase. The way that Apple prefers to see iTunes as though every sale is to a consumer and so VAT receipts aren't necessary because consumers can't claim back the VAT. However, if a business selling is VAT registered and a business buying is VAT registered, they have to provide the receipt.

    https://discussions.apple.com/message/17663869#17663869

    "For EU citizens:
    I had the same problem, and send an e-mail to [email protected]
    I received the requested VAT invoices the next day. Make sure you mention your Apple ID in your request.

    Since the european iTunes Store is legally located in Luxembourg, they use the VAT percentage used in Luxembourg: 15 %, which if you have a business can be reclaimed in Luxembourg."
    What is slightly strange is that there is talk of iTunes sales falling big time.

    I suppose it is because whilst manufacturing extra profits by avoiding tax, iTunes still somehow manages to be the expensive way to buy music.

    When Windows and Android users suggest a big failure of Apple, we can generally assume that means...

    http://www.theverge.com/2014/1/3/5271528/music-sales-decline-for-the-first-time-since-the-itunes-store-opened

    6% drop. Certain doom. Unlimited streaming on subscription would be a nice option to have. $10 per month unlimited and split the amount due to the artists based on how much songs are listened to by unique iTunes IDs.
  • Reply 50 of 55
    hungoverhungover Posts: 603member
    Quote:

    Originally Posted by Marvin View Post





    Sounds shady, developers and buyers have had similar issues getting accurate VAT info because they need VAT receipts and Apple didn't used to give them out:

     

     

    Hi Marvin.

     

    My email to apple was "anonymous", ie., not tagged to my Apple ID. I did reply to their less than helpful email, explaining that I just wanted to know what rate of VAT was applied. Their response was that they would  need my Apple ID.

     

    I do not understand why one needs to do this though. AFAIK one is legally entitled to know what rate of VAT is being applied. The Apple site suggests 23% (whereas others here suggest 15%), all I am trying to do is get clarification.

     

    I really don't understand why they are being so unhelpful.

  • Reply 51 of 55
    asdasdasdasd Posts: 5,686member
    hungover wrote: »
    Hi Marvin.

    My email to apple was "anonymous", ie., not tagged to my Apple ID. I did reply to their less than helpful email, explaining that I just wanted to know what rate of VAT was applied. Their response was that they would  need my Apple ID.

    I do not understand why one needs to do this though. AFAIK one is legally entitled to know what rate of VAT is being applied. The Apple site suggests 23% (whereas others here suggest 15%), all I am trying to do is get clarification.

    I really don't understand why they are being so unhelpful.

    Well it's complicated. But in theory until 2015 the app devs if they owe VAT at all owe it in their own country to their own tax authority, not the consumers country. Apple appears to pay in Ireland or Luxembourg.
  • Reply 52 of 55
    hungoverhungover Posts: 603member
    Quote:
    Originally Posted by asdasd View Post





    Well it's complicated. But in theory until 2015 the app devs if they owe VAT at all owe it in their own country to their own tax authority, not the consumers country. Apple appears to pay in Ireland or Luxembourg.

     

    I was asking what the VAT rate was from the perspective of a customer. As such it is incredibly easy for them to tell me.

     

    TBF to the agent that I contacted, I did ask three questions initially. The first was what rate do UK iTunes customers pay. The second was, how does one request a VAT receipt. The third wasn't really a question but an observation, the Apple contact page does not recognise email addresses ending in .me.uk 

     

    In my follow up response I made it abundantly clear that I just wanted to know which VAT rate was applied to iTunes purchases.

     

    I have subsequently sent another email via the apple site asking, in very plain English, what rate of VAT do UK based iTunes customers pay.

     

    Whilst in no way wanting to endorse Google, I emailed the same question to them some months ago and received a straight forward answer telling me that as a UK customer I pay the UK VAT rate of 20% for digital downloads. I have no idea what rate MS charge.

     

     

    --------

     

    Edit, received a very speedy reply from Apple support following this morning's new email, 

     

     

    Quote:


    I understand that you want to know iTunes store VAT rate for UK. I know how eager you are to know about the tax. I will look in to this for you.


  • Reply 53 of 55

    How dare the UK do this!  Apple should buy 'Great' Britain and shut them down!

  • Reply 54 of 55
    Quote:
    Originally Posted by Crowley View Post





    By doing what?



    The banking crisis was not made by the Labour government, and any measures they could have taken to avoid it certainly wouldn't have been taken by a Conservative government, nor were they argued for by any opposition save Vince Cable. On the other hand the Tories have raised VAT hitting low and medium earners in the wallet (Labour reduced it for their final year), crippled HMRC and the UKs ability to meaningfully pursue tax revenue, cancelled the 50% tax rate forgoing billions, written off huge sums owed by multinationals, and meanwhile poured blame upon the poorest, the most vulnerable, and immigrants, while increasing censorship and restricting civil liberties.



    Scotland was being discussed elsewhere, but if Scotland does gain independence it will be a disaster for the people of England for no other reason than gifting the Parliament to the current Tory nightmare for the foreseeable future.

     

    The problem with labour was that they increased the countries spending (especially benefits) to an insane degree. With such high spending in place they then reduced tax and other sources of income, making us extremely vulnerable when the recession hit.

     

    Yes, no government is perfect, but considering what the Tories have done and are doing; reduced the deficit, pulled us out of recession, fighting for more power in Brussles, the recent laws for savings and pensions etc., I'd more than happily vote for them again over Labour. I mean jesus on a biscuit, Balls' and Co's policies are to spend even MORE MONEY! Money we don't have!

     

    I'd rather not end up like Greece, thank you very much.

  • Reply 55 of 55
    zabazaba Posts: 226member
    The problem with labour was that they increased the countries spending (especially benefits) to an insane degree. With such high spending in place they then reduced tax and other sources of income, making us extremely vulnerable when the recession hit.

    Yes, no government is perfect, but considering what the Tories have done and are doing; reduced the deficit, pulled us out of recession, fighting for more power in Brussles, the recent laws for savings and pensions etc., I'd more than happily vote for them again over Labour. I mean jesus on a biscuit, Balls' and Co's policies are to spend even MORE MONEY! Money we don't have!

    I'd rather not end up like Greece, thank you very much.
    So selling off our assets to their mates for instant profit, post office, NHS, school buildings, and giving tax cuts to those very same people. Maximised student fees, let pay day loan companies do what they want. Let banks charge more to less well off than they would to well off. Yes this government has managed to rape and destroy the fabric of society as only the Tories know how. They are partly to blame for the banking crisis (thatcher policy). This country is in a bad way, they only people suffering under austerity are the average person. The rich are in no way affected. People like you who listen to the Tory propaganda about benefit cheats, this number is tiny compared to the fraud that happens at the top.
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