U.K. to implement a 20% tax on digital downloads

Buried within the latest budget plan for the UK, Chancellor George Osborne announced new laws that would ensure internet downloads from the likes of iTunes, Google Play Amazon and game networks would be taxed in the country they’re bought in. In the case of the UK, that would be around 20 percent VAT, substantially more than selling through countries like Luxembourg where the rate can be around 3 percent.

George Osborne‘s latest budget could spell an end to 99p song downloads by closing a tax loophole that meant consumers were paying VAT at very low foreign rates on online purchases of books, music and apps. The chancellor will bring in new laws making sure that internet downloads are taxed in the country where they are purchased, meaning web firms such as Amazon and Apple will have to charge the UK’s 20% rate of VAT. At the moment they are allowed to sell digital downloads through countries such as Luxembourg, where the tax rate is as low as 3%. In a little-noticed announcement, Osborne said he would used this year’s finance bill to impose the new law from 1 January 2015.