Yahoo Finance Apple app developers to take hit from UK tech tax
Apple has said app developers will shoulder most of the cost of the UK’s new “tech tax”, following Google’s advertising and Amazon’s online marketplaces in passing on the levy.
An update sent to developers by the iPhone maker this week said that the 2pc digital services tax (DST) will start to be charged on apps in the coming days.
The DST, formulated under former chancellor Phillip Hammond, is designed to raise £500m a year for the Treasury through a levy on search engines, social media companies and online marketplaces such as Amazon’s third party seller system and Apple’s App Store.
Although it comes in response to concerns that tech giants do not pay enough tax, several large tech companies have said they will pass the costs on in the form of higher charges to advertisers and sellers.
Developers on Apple’s App Store take at least 70pc of an app’s sales after taxes, meaning the cost of the new tax will be shouldered largely by the companies that design and engineer the apps, many of them independent businesses, rather than Apple itself. Developers cannot raise prices in line with the tax, since apps must be priced at set tiers such as £4.99 or £9.99.
Adding the 2pc DST to existing VAT charges will reduce the amount that both developers and Apple itself receive from app sales. After taxes, Apple takes up to 30pc of an app’s sales.
Apple said it would also add tax charges in France and Italy, which are also introducing similar digital taxes. Multiple countries are introducing or considering digital taxes, stoking anger from the US, which has launched investigations into countries including the UK, claiming the levies disproportionately target American companies.
Google told advertisers on Tuesday that it will charge advertisers an extra 2pc in fees from November 1, while Amazon is also passing fees on to sellers by the same amount.
