VAT changes could mean dearer downloads

Posted on 12 Dec 2007 at 08:34

Changes to VAT rules could mean higher prices for music downloads - by 2015.

The European Union is introducing reforms designed to eliminate tax advantages in certain countries. Many ecommerce operators have based themselves in Luxembourg to take advantage of the EU's lowest VAT rate of 15%, among them household names such as Amazon, AOL, Apple, Ebay, PayPal and Skype.

But from 2015 VAT on many business-to-consumer transactions will be charged where the customer is located. In the UK that will raise the tax rate to 17.5%; in other countries the impact will be higher, most notably Sweden where 25% is added to each transaction.

The delay in implementing the change comes at the behest of Luxembourg, which has a significant income from companies enjoying its low rate.

The new rules apply to broadcast, telecommunications and electronic services - the latter including music, movie, game and ringtone downloads.

Author: Simon Aughton

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