UK iTunes VAT: Confirmation and More Questions

Okay, so I’ve finally found confirmation of the iTunes VAT issue, which I’m certain wasn’t anywhere to been seen before this morning. The following small print can be found at the foot of Apple UK’s iTune Gift Card page:

“Prices are inclusive of VAT (15%) but exclusive of delivery charges unless otherwise indicated. The VAT rate for Electronic Software Downloads or other Apple products classified as services under EU VAT law will be (21.5%) as VAT is charged at the rate payable in the country where Apple Sales International supplies such products, which is the Republic of Ireland. The order form shows you the VAT payable on the Products you select.”

This neatly answers the question of why iTunes prices haven’t fallen today. It also confirms what I had suspected. But as I mentioned at the end of that article, it posses another difficult question for Apple. For years they’ve been charging consumers a higher rate of sales tax. Almost two years ago there were concerns raised that tracks in the UK cost more than elsewhere in Europe. Earlier this year, Apple announced that it would not be taking any action to reduce these prices.

My back-of-an-envelope calculations suggest that basic iTunes tracks cost 65p before VAT, rising to the 79p price point when Ireland’s 21.5% is added. Assuming that this price remains constant no matter where content is served from, UK consumers should have been paying just 76p per track up to now, and 75p from today. (My calculations in today’s news roundup were incorrectly based on Apple currently paying VAT at the UK rate. Sorry.) Yes, we’re only talking pennies here, but iTunes UK has sold millions of tracks, with some purchasers buying hundreds, and all those pennies begin to add up. (And I should also note that while VAT is shown broken-out on on-line Apple Store invoices, it is not shown on iTunes and App Store purchase invoices.) How long is it before someone asks whether this tax surcharge to UK consumers was fair?