Apple, Google, and Amazon respond to European tech taxes by passing on costs

Illustration by Alex Castro / The Verge

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.

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.

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.

Comments

You gotta love these companies for their "customer first" approach

Unreasonable profit first. The customer can get lost.

What do you expect? If your store’s rent goes up, you increase your prices. If your local sales tax goes up, you don’t lower your prices to keep the end cost to the customer the same as before.

These companies are not non-profit orgs. They will always try to make as much profit for their shareholders as possible.

If your costs go up, whilst you might like to increase your prices, in a normal market you can’t. However, if you are a monopoly supplier then you pretty much can. It is the job of the state to arrange things so that monopolies do not exist, or if they do that their price-making power is curbed.

First of all, it’s misleading to pass a tax increase as "costs" because costs vary between companies. Any market competitor would have the exact same tax increase and would increase their prices the same way.

Second, are you saying Apple is a monopoly in UK? Amazon is a monopoly in UK? Because that’s categorically not true.

Apple have a monopoly in the app store. That’s where they increased the prices for their customers. Same with Amazon in their marketplace. This while still competing themselves. Making it harder for the competition and blaming "unfair taxes".

depends. If your costs go up, while others don’t, you probably have to keep prices the same and eat the costs. But if it goes up for everyone? Everyone increases the prices. We see this in here every year – every year government sets much higher minimal wage and every year, after few months, everyone is raising prices. Only difference between companies is that one does it preemptively in Novmeber, other can bear the costs until April.

Competition wouldn’t necessarily prevent this either (not that I’m objecting to competition). Collusion among market participants to control costs is a thing.

I’ll pass my next property and sales tax rate increase to my employer: "… my expenses are going up boss, my new salary/wages should go up by the same rate/amount!". Hope that goes well.

If your salary is not keeping up with living expenses and another employer is offering you a better salary that’s pretty much the jist of how it goes.

Well, that’s how inflation works

What do you expect? If your store’s rent goes up, you increase your prices.

Sounds fair.

So that means devs should be able to add 30% to app prices on Apple’s app store, right?

The devs set their own app prices. They can price it however they want as long as consumers will pay for it. By the way, 30% of that 30% increase will go right into Apple or Google’s pocket so they still win.

The difference is that devs can’t charge more in the App and Play stores vs signing up in a different website.

I’m sure no one would have a problem paying $10/month for a subscription via Spotify.com vs having to pay $15 a month for the same service via App Store.

That will absolutely cannibalize the app stores revenue streams.

They can set their prices at whatever they want? If they’re not setting their price at profitable level then yes they should probably increase it.

They can set their prices at whatever they want?

No, apple don’t allow a company to set their prices higher on apple’s app store to recover the higher tax applied by apple.

Wait, did you think they were just eating up those 30%? They should give us a discount if Apple actually rescinds that fee.

Well it´s not a cost, it´s a tax. Everyone needs to pay their taxes. Yes a lot of companies uses loopholes but seriously? They and everyother tax evader need to contribute and those taxes should be calculated into the price of doing business in country X.
Why should a shop owner pay 25% tax and amazon less then 2%?

That´s the issue at hand here, money flowing OUT, very little if anything coming in.
I have no issue wiith making money but it´s time companies like these pay their fair share.

Well, guess where the money companies pay as taxes is coming from.

Differences being : most company pay taxes – while Facebook Amazon Apple and Google practice "defacto tax evasion" by using fiscal loopholes.
Provided that context passing on the tax burden to their customer might be legal but is no means responsible behavior even for a for profit company.
Now if Ireland, the UK, Netherlands ect were to close their tax heaven loopholes …

If the UK, the Netherlands etc. are doing quite well with their lower taxes, maybe Germany doesn’t need to tax higher, after all. It’s only natural to seek a better deal, so maybe Germans should just fuck themselves and their greed.

Wait, but aren’t taxes good for everyone in the end of the day, thus worth paying?

So. Fucking. Tiresome.
The tech companies could easily eat the extra taxes with their vast profits, but like immature schoolkids are making a point.

Time for UK and EU consumers to look elsewhere and eat into their profits (if only…)

What would be the difference if there are multilateral unified taxation frameworks: is it only then that these companies realize they have to pay their way?

The very fact that they don’t "eat the taxes" from their vast profits shows that they are not subject to market competition – hence the vast profits.

If they had competition that competition would have the same taxes levied on them and pass it on as well. Its kinda crazy to have such a specific tax passed on companies because they are big. This has not worked in the past and will not work now.

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