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UK Government Looking to Close Loophole on Digital Purchases; Could Cost UK Buyers 20% More in the Play Store

March 24, 2014 - Written By Tom Dawson

Our UK readers will know that this week the UK Government announced their budget for the next year, and in it was the usual adjustments to income allowance and some interesting schemes from Mr Osborne. A relatively well received budget this time around, the Coalition’s latest budget holds some interesting news for us digital folk. In the UK, it’s been easy for companies selling digital music, books, movies, apps and games to avoid the 20% VAT imposed on all purchases made in the UK. Simply done by sending the digital cash somewhere else outside of the UK, Apple, Amazon and Google are all in on it. Most of these companies (including Amazon) sell their digital wares out of Luxembourg, which has a tax rate as low as 3%.

Tax avoidance was a hot topic last year in the UK, and as a Brit myself it wasn’t the nicest thing to see Amazon and Google cheat the UK out of massive sums by selling their wares offshore. Of course, the loophole was there for these companies to take advantage of, so who can blame them? This latest budget from the Coalition however, would close said loophole when it comes to digital goods. A statement from a budget document reads: “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.” This adjustment won’t come into effect until January 1st 2015 however, so there’s time yet to gorge on those 99p downloads.

If you’re thinking that the UK Government is simply looking for more money under the sofa, the Guardian reports that the UK could have paid for the Olympics using VAT lost from such downloads from 2008 to 2014, and that in 2012, as much as £1.6 Billion was lost on digital downloads. Frankly, this sort of thing should always have been in place, it shouldn’t matter whether I’m buying a game from my local store or from Google’s online store, it’s still a game and taxes need to be paid. It’s about time that a Coalition led by the Conservatives looked to big business to adjust the nation’s bottom line, instead of hardworking individuals. That’s just my view though, let us know what you think in the comments and over on Google+!