The closure of a tax loophole in chancellor George Osborne’s 2014 Budget could mean an end to the 99p download.
According to reports, currently companies like Apple and Amazon are able to sell digital goods through offices in Luxembourg. This enables them to be taxed at local rates of three percent.
However, the change in the law will mean these items need to be taxed in the country of sale - meaning rates could increase to 20 percent.
In the report, the chancellor said: ‘From next January VAT will be charged in the country where goods and services are consumed rather than where the supplier is based. This was leading to some companies deliberately locating in countries with a much lower tax rate. We expect VAT receipts to increase by £300 million a year as a result.’
The new law is expected to come into effect from 1 January 2015.
It is unclear at this stage whether the increase in cost will be passed on to music lovers or whether the tech companies will absorb the rise to maintain prices at their current rate.
According to reports, currently companies like Apple and Amazon are able to sell digital goods through offices in Luxembourg. This enables them to be taxed at local rates of three percent.
However, the change in the law will mean these items need to be taxed in the country of sale - meaning rates could increase to 20 percent.
In the report, the chancellor said: ‘From next January VAT will be charged in the country where goods and services are consumed rather than where the supplier is based. This was leading to some companies deliberately locating in countries with a much lower tax rate. We expect VAT receipts to increase by £300 million a year as a result.’
The new law is expected to come into effect from 1 January 2015.
It is unclear at this stage whether the increase in cost will be passed on to music lovers or whether the tech companies will absorb the rise to maintain prices at their current rate.
