DIGITAL DOWNLOADS are set to attract VAT as the government seeks to prevent tax leakage caused by vendors paying local rates in lower-tax jurisdictions.
Currently, businesses such as Apple and Amazon sell virtual goods such as music, e-books and apps through offices based in Luxembourg and other low-tax areas, where they are taxed at local rates – in Luxembourg’s case, at 3%.
Under the new rules, set to be introduced in January after being put forward by George Osborne in a report released alongside the Budget, virtual products will be taxed at the point of purchase with VAT at 20%.
The move would see the price of a typical song on iTunes rise from 99p to £1.16.
“From next January VAT will be charged in the country where goods and services are consumed rather than where the supplier is based. This was leading to some companies deliberately locating in countries with a much lower tax rate,” the chancellor said in the report.
VAT yields are expected to rise £300m following the levy’s introduction.
CIot urges HMRC to consider a delay to the 1 September 2017 introduction of its new corporate offence of failure to prevent the criminal facilitation of tax evasion
The current business rates system is over-complex and reform is needed, but reforms should focus first of all on simplifying the appeals process, particularly for businesses which are subject to business rates exemption
The CIoT has called on the government to rethink its approach to ensuring online sellers pay the correct amount of VAT.
So for anyone dismissing Pokemon, and in fact any developments in modern culture - I’d respectfully suggest pulling your head out of where the sun doesn’t shine