For many years, Europe has been unhappy with the tax habits of US tech giants. As regulators and politicians have often noted, these firms make vast amounts of money from European citizens but pay a pittance in tax. In the absence of an overhaul of the global tax system, a number of European nations have introduced new taxes aimed specifically at these companies. And the tech giants are responding by passing on the costs.
Over the last month, for example, Apple, Google, and Amazon have all announced price changes for UK enterprise customers specifically designed to offset a new “digital services tax” introduced by UK government. This increases tax on any revenue produced by “search engines, social media services and online marketplaces” by 2 percent.
“Digital service taxes increase the cost of digital advertising.”
In response, Apple is changing how it pays developer fees on the App Store in the UK. On top of the usual 20 percent VAT it pays to the government on each purchase it’s adding an extra two percent before splitting what remains between the developer and Apple, meaning less money for both. Google, meanwhile, is increasing fees for all advertising bought on Google Ads and YouTube in the UK by 2 percent. “Digital service taxes increase the cost of digital advertising,” a Google spokeswoman told The Guardian regarding the news. “Typically, these kinds of cost increases are borne by customers and like other companies affected by this tax, we will be adding a fee to our invoices, from November.”
From September 1st, Amazon is also increasing fees for third-party sellers by 2 percent. It told sellers it had previously held off on this increase while the UK’s digital service tax was being discussed, but “now that the legislation has passed, we want to inform you that we will be increasing Referral fees, Fulfilment by Amazon (FBA) fees, monthly FBA storage fees and Multichannel Fulfilment (MCF) fees by 2% in the UK to reflect this additional cost.”
This is not just happening in the UK, either. Originally, European nations had intended to spearhead a new global tax on Big Tech, but negotiations fell apart several months ago after the US refused to play ball. Some European countries, including the UK, France, and Italy, went ahead regardless and introduced their own new national taxes. In many cases, these countries are being hit by similar price rises from the tech giants mentioned above. In Turkey, for example, Apple is raising App Store prices for consumers by 7.5 percent in response to the country’s new digital services tax.
Such increases are not that unusual. Apple, for example, regularly tweaks its App Store fees in response to differences in countries’ tax regimes and currency valuation. The iPhone-maker increased App Store prices for UK consumers by 25 percent after the pound lost value following the Brexit vote, for example. But this particular set of responses does send a message to politicians in countries hoping to increase their tax revenues from US tech firms: try to make us pay more and we’ll just pass it on.
Tech giants say they want global, not national, tax changes
What tech firms say they want instead is a new global framework for tech taxation. A Google spokesperson told The Guardian that the company will continue to “encourage governments globally to focus on international tax reform rather than implementing new, unilateral levies,” while a spokesperson for Amazon told Business Insider: “Like many others, we have encouraged the Government to pursue a global agreement on the taxation of the digital economy at OECD level rather than unilateral taxes, so that rules would be consistent across countries and clearer and fairer for businesses.”
But given America’s current stance (including threats by the Trump administration that any new taxes will be met with retributive measures), the tech giants are in little danger.
Correction: A previous version of this story said Apple was “increasing its cut of developer fees” in the UK. That is incorrect. Apple’s adjustments to prices and tax withholding do not affect its proportional revenue share with developers.