UK Closes Tax Loophole On Digital Downloads, Prices Could Soar 20 Percent

Apple, amazon, and other digital item retailers will have to charge 20% VAT starting in 2015

A long-standing tax loophole has been available in the UK that allowed buyers of digital download products to pay fewer taxes on their purchases of digital books, music, and apps.

That loophole has now been closed and it will mean that Apple and Google now have to charge the standard 20% VAT. This likely means an end to music being offered at 99p.

Apple and other digital good sellers were allowed to funnel digital purchases though countries like Luxembourg where the tax rate was as low as 3%.

The new law will go into effect on January 1 2015, so fans of digital products in the UK have a bit less than a year before rates go up significantly. The new taxes are expected to raise an additional £300 million in tax revenue.

Both Apple and Google have come under fire in recent years for their tax avoidance practices in the UK. Google executive chairman Eric Schmidt defended his company in April 2013, stating, “I think the most important thing to say about our taxes is that we fully comply with the law and we’ll obviously, should the law change, we’ll comply with that as well.”

Credit: Daily Tech