Thursday, September 3, 2020 [Tweets] [Favorites]

App Store Foreign Tax Changes

Apple:

When taxes or foreign exchange rates change, we sometimes need to update prices on the App Store. In the next few days, prices of apps and in-app purchases (excluding auto-renewable subscriptions) on the App Store will increase in response to tax changes in Chile, Mexico, Saudi Arabia, and Turkey. Your proceeds will be adjusted accordingly and will be calculated based on the tax-exclusive price.

[…]

In addition, your proceeds will also be adjusted in Germany, France, Italy, and the United Kingdom, and will be calculated based on the tax-exclusive price. However, prices on the App Store will not change.

France, Italy, and the United Kingdom have added digital services taxes of 2–3%. I don’t understand why Apple is not updating the pricing tiers to take this into account, like it does for VAT. Instead, the tax is mostly coming out of the developer’s cut.

The UK tax was intended to affect “large multi-national enterprises” with £500 million in revenue, but since Apple is the one collecting the payments it pushes very single developer over that limit.

Apple notes that you can change the price at any time, but that’s not very helpful in this case. Unlike other payment processors, the App Store doesn’t let you set different prices in different regions. And there’s no way to raise the price a small amount because you can only go up to the next whole tier.

Previously:

8 Comments

"The UK tax was intended to affect “large multi-national enterprises” with £500 million in revenue"

I didn't know that, I wondered how it had appeared with zero warning. I just checked my accounts and I don't have £500 million in revenue :(

The UK, France, etc were angry that Apple, Amazon, Google, Facebook (etc) base themselves in Ireland and Luxembourg, and pay less than a 1% tax there, while making boatloads of money in the UK, France, etc, undercutting the local digital equivalents...

So, they create a tax that cannot be avoided, and Apple goes and shafts independent developers with it. This illustrates exactly how much Apple cares about its independent developers: exactly as much as generals care about cannon fodder.

@MichaelTsai

Could one create an EU and a US variant of the same App, and then sell one only in the US for half the price than the other one sold only in the EU? Perhaps one could change some functionality to make them sufficiently different for Apple. It's more work, but would permit 2 tiers. I can't remember if that is permitted by the rules...

The claim that this change is biased against developers makes no sense. The effect of the tax is to lower the revenue *pro-rata* for both Apple and developer with the 30/70 split remaining in place, the same as it has every other time in the past that local taxes were either raised or dropped.

Also, given that Apple's price tiers are often rounded (or more likely actually adjusted to x.99 amounts), a small change like this won't warrant a change in the retail price anyway. That is typically something Apple reviews over much longer time periods, also to account for exchange rate changes that have moved over time.

Simona Cardenas

I'm sympathetic in principle to the idea that Apple should bear the costs of these particular new taxes, but I don't think it's feasible operationally for to start considering the "intent" of every new local tax worldwide and then make a call about whether Apple should pay or developers should pay.

Typically intent isn't even spelled out in tax legislation; it's only inferrable from statements by legislators or politicians. In ambiguous cases, there's be inevitable grumbling about whether they made the right call

And then what about developer size? Presumably Adobe was intended to be included within the intent of these new taxes, should Apple pass the cost on to them but not to smaller developers?

@Graham @Simona I’m not making the claim that it’s “biased,” whatever that means, or that Apple should bear 100% the cost. I’m pointing out that the pricing tier system makes it impossible for developers to respond, despite what Apple says. Whereas, Apple could adjust the pricing tiers, as it does for other taxes. At the lower levels, they aren’t always round numbers, anyway. The good news is that it’s only a few percent, and so hopefully for a larger change Apple would adjust the tiers.

Answering myself: section 4.3 might or might not allow what I suggested... it's unclear.

Personally I think the EU countries would do better by fixing the tax loophole used by Luxembourg and Ireland, rather than imposing new digital taxes.

On Germany, taxes were actually reduced while price tiers stayed the same.

Apple‘s and developers‘ interests are very much aligned here. They both want to avoid reduced profits in individual countries. So developers shouldn’t worry.

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