It’s EU, Stupid: Apple And Amazon Get Stung By Osborne In The Budget
THAT’S what the newspapers are reporting this morning, that Osborne has stung the big internet companies like Amazon and Apple by changing the rules on VAT rates. Although it’s not actually Osborne who has done this, it’s the EU:
Multinational companies such as Amazon and Apple will be forced to add VAT to all UK downloads including music, film, smartphone games and e-books from January 2015 in a move that may drive up the cost of music tracks from 99p to £1.19.
The move forms part of the Government’s “international efforts to develop tough, new global tax rules,” George Osborne said in his Budget address last week. From next year, download services will be subject to VAT in the country where the consumer is located.
According to the Office for Budget Responsibility (OBR), the change will attract an extra £300m in VAT revenues in the first year.
The Mail covers the story in much the same way. However, this is nothing to do with Osborne or the UK budget. This is a change in the central EU rules about VAT. HMRC published the regulations some time ago:
On 1 January 2015, changes will be made to the European Union (EU) VAT place of supply of services rules involving business to consumer (B2C) supplies of broadcasting, telecommunications and e-services. A consumer means a private individual.
This must be obviously true, for the rules about VAT are EU rules and no national government can change them in this manner on their own.
What’s actually happening here is that goods which are sold across borders carry the VAT rate of the country into which the goods go. However, electronic and digital goods carry the VAT rate of the country which they are sold from. Apple and Amazon sell their songs, online videos etc, from Luxembourg which does deals on the VAT rates which must be paid. The new rules mean that those digital goods will now carry the VAT rate of the country of destination, just as with physical goods.
And that’s it. Completely sod all to do with Osborne, the Budget or the UK government.