The price of digital downloads look likely to be subject to an increase in price as early as next year, as the latest budget announcement suggests a change in tax law that would see them subject to UK rates.
These changes would affect music and film downloads, games, e-books and other smartphone apps, which could see the end of the 99p music download prices that many people have got used to.
The Chancellor announced the decision to news providers as part of the country’s budget for the year, albeit in a part of the announcement that that has been less focused on. It comes as part of an EU-lead campaign to ensure that taxes are levied in the country of purchase rather than where a business is located. Some companies have offices based in countries with a lower tax rate than the 20% we have in the UK. In Luxembourg, for example, the tax rate for music and film downloads is set at 15% and the tax rate for e-books is set at 3%. These changes could come into effect as early as January 1st 2015.
It is believed that approximately 34,000 companies will be affected by the change, according to the Office for Budget Responsibility, with the move having the greatest effect on online stores such as Amazon and iTunes. It is still uncertain on whether this will mean these companies will be forced to increases their prices, since neither firm has commented on the news thus far.