George Osbourne Closes Tax Loophole On Digital Music

Downloads to be taxed at British VAT level...
George Osbourne

Unveiling this year's budget, Chancellor of the Exchequer George Osbourne presented a flurry of facts and figures for public consumption.

Some - bingo and beer, for example - immediately stuck out. Others, though, did not, and as the days pass economic experts are beginning to unpick the government's plans.

A lesser heralded development in economic policy is the decision to tax downloadable goods at the British VAT rate of 20%. The decision will affect sites such as Amazon, who under previous arrangements were able to sell goods at the rate of any EU country - utilising lower VAT rates in the process.

The budget document said: "As announced at budget 2013, the government will legislate to change the rules for the taxation of intra-EU business to consumer supplies of telecommunications, broadcasting and e-services. From 1 January 2015 these services will be taxed in the member state in which the consumer is located, ensuring these are taxed fairly and helping to protect revenue."

As the Guardian point out, official estimates point to an additional £300m for the Treasury. Greenwich Consulting previously pointed out in 2012 that the UK government was losing out on more than €2bn (£1.6bn) a year in VAT on digital services.

Of course, one way of service providers to pass on these tax hikes is to raise prices - does this spell the end of the 99p download? Time will tell...

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