Tech

Big Tech finds a way to pass on the cost of digital taxes in Europe

Key Points
  • Apple has announced that it will increase its charges for app developers in the next few days.
  • Digital services taxes is a topic that has sparked division between a number of countries and the United States.
  • The White House believes the introduction of such levies is unfair and discriminates against American firms. 
External View of the Apple store on Fifth Avenue on August 19, 2020 in New York City.
VIEW press | Corbis News | Getty Images

Apple has announced that it will increase its charges for app developers, as it becomes the latest tech giant to pass on some of the costs of new digital taxes to smaller businesses.

The move, announced Tuesday, comes after countries including the U.K., France, Italy and Turkey implemented digital services levies, which force tech giants to pay more taxes. However, Apple also said that some of its latest price adjustments were taking place due to changes in VAT (value-added tax) rates.

"When taxes or foreign exchange rates change, we sometimes need to update prices on the App Store," Apple said in a statement.

It went on to say that charges would be adjusted in Germany because of VAT changes and new digital services taxes in France, Italy, and the U.K. App store prices will not be changed in these countries, the company said. However, the prices of apps and in-app purchases on the App Store will be increased following tax changes in Chile, Mexico, Saudi Arabia, and Turkey.

Apple was not immediately available for further comment when contacted by CNBC on Wednesday.

Digital services taxes is a topic that has sparked division between a number of countries and the United States, the home of these tech behemoths. The White House believes the introduction of such levies is unfair and discriminates against American firms. 

It has been embroiled in discussions with other countries on how to overcome their differences on digital taxation for some time. However, Washington pulled out of talks on the subject earlier this summer, questioning whether any resolution will be found before the end of the year. 

Google too

Apple is not the only company passing on the costs of the new taxes.

In a statement a few days ago, Google told advertisers: "As of November 1, 2020, a 2% UK DST (digital services tax) Fee will be added to your next invoice or statement for ads served in the United Kingdom. The fee is driven by the new digital services tax in that country."

Google Ads' fees will be updated on November 1 to reflect the new digital levies in the U.K. and Austria, the company said.

Earlier in August, Amazon also said it was increasing charges on sellers after the U.K. government approved its digital tax.

"I'm not surprised by the price changes," Dexter Thillien, a senior industry analyst at Fitch Solutions, said via email.

"There is nothing to prevent tech companies to do so, even if it doesn't really look good for their images," he said. He added that "this is not so much a tax issue but a competitive one, because ultimately end-users, whether developers, marketplace sellers or others, will need to use these services, and end up paying the tax."

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